Your credit score plays a huge role in your adult life — it can help you acquire loans and credit cards easily, only if done right. But there’s also such a thing as bad credit scores. And by now, you probably know some people who have bad credit scores. 

Are you wondering how they got to this dark place? Here are some of the reasons why. 

1. Ignoring Bills 

You need to be responsible to pay your bills. The thing with bills is that they’re set — you know they’re coming and most often than not, you have an idea of how much it will cost you. However, if a person isn’t responsible, they would end up ignoring their bills until it goes into collections. The same act applies when a person doesn’t have the money to pay the bills. 

When you do this, you hurt your credit score. And eventually, it will reflect on your credit report that can translate into a bad credit rating. 

2. Having A Lot of Loan or Credit Applications

Sure, you can apply for a loan or a credit card to keep up with your expenses. However, it becomes a problem when you get carried away, and this happens. 

When you apply for a loan or a credit score, lenders will run a credit inquiry to see if you are eligible for a loan or a credit card. Every time they run this through their system, it’s recorded on credit bureaus. Therefore, if you have too many credit applications within a short period, your credit score will get affected. Because this will show that you barely care about the repayment terms, which is a bad sign. 

3. Maxing Out Credit Cards

It isn’t right to max our your credit card to its limit. Yes, using your credit card is one way to build a good credit score. That IS, if you don’t overuse it and you pay your debts on time. Using your credit cards too much can hurt your credit score. So no, the sky isn’t the limit when it comes to your credit cards. Keep your credit card spending moderate. 

4. Declaring Bankruptcy

We’ve seen it happen — big companies declaring bankruptcy while others declare it to get creditors off of their backs. 

Bankruptcy may be an appealing option if you don’t want to deal with your debts anymore but this has major consequences that you have to live with for years, or even for a lifetime. So, think before you act. Bankruptcy can put a huge dent on your credit score. 

5. Disorganized Finances

One of the best ways to stay out of debt is to properly track your finances. If you’re disorganized and you have no clue where most of your money is going, then you’re going to have a big problem. When this happens, you’ll keep getting sort that will lead you to taking out more loans than you can handle. Credit Made Simple, a team of finance specialists for bad credit scenarios, say that most borrowers will get into bad credit situations because of poorly organized home finances.

These are the five common reasons why people have bad credit score. If you’re one of them, consider this a sign to start sorting out your finances before it’s too late. You can still rebuild a bad credit score by sorting out your finances and repaying your debts one at a time.