Bad Credit: Why It Happens And What To Do

Finances can be confusing. And when you try to learn about money stuff, it just looks like alphabet soup. IRA this, KYC that. Wtf? 

Don’t worry—Cleo’s your translator. And today we’re learning about ~thrilling~ credit scores. 

Over 100 million Americans have a low credit score or are credit-invisible or unscorable. That’s a serious barrier to financial products. You’re also less likely to be able to access credit that isn’t gonna bankrupt you before you’re 22 🙃 Semi-jk. 

But luckily, you can do something about that. Let’s learn about credit scores, what bad credit means, and things like a bad credit cash advance. 

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What Is A Credit Score?

It’s not quite as cool as it sounds, unfortunately. It’s another one of those finance-y things.

Simply put, it’s a score that tells lenders and service providers how risky you are based on your financial history. Yeah, that ~fun~ stuff.

Your credit score is also called a FICO score. And that stands for Fair Isaac Corporation, a data analytics company 😴

Bored already? Same

If you’ve taken out a line of credit and missed a payment, they’ll give you an “it’s not me, it’s you” kinda score. If they do let you borrow again, it’ll come with a hefty chunk of interest. And they might slap you with some fees for good measure. Because why not make money off people who are already struggling? 🙄

Meanwhile, you might get a good score or above if you’ve been a good little capitalistic cog. Lenders will be more willing to throw some money your way. And it’ll usually be cheaper in fees and interest. 

Credit scores vary by credit bureau. Experian’s FICO breakdown currently looks like this: 

• Exceptional: 800 to 850
• Very good: 740 to 799
• Good: 670 to 739
• Fair: 580 to 669
• Poor: 300 to 579

While it all feels a little Black Mirror-esque, it’s one way to make sure your finances don’t end up in a Nosedive 😉

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How Do I See My Credit Score?

Unlike life, finding out your credit score is super easy. Experian, Equifax, and Transunion are the three main credit bureaus. 

Pop your details into one of these sites, and they’ll show you what score you’re working with. These “soft checks” don’t affect your score, so don’t worry about that. 

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Why Am I Credit-Invisible or Unscorable?

According to the US Consumer Financial Protection Bureau (CFPB), almost one in five Americans are credit invisible or unscorable. And 15% of Black and Hispanic consumers have invisible records compared to 9% of White consumers. 

And if you're like “Bro, if I was invisible, I wouldn’t have to pay bills,” mood 💀

So, why does this happen? And can you upgrade your ✨ finance invisibility cloak ✨ so your landlord can’t see you?

Sorry, no ❤️ There aren’t any benefits to being credit invisible or unscorable. It can actually make life even harder 👁👄👁

You may be unscorable or invisible because:

• You’ve never borrowed money from a financial institution (or ages ago)
• You’ve never paid bills in your name
• Your record is incorrect 

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Why Do I Have A Bad Credit Score?

If you’ve already checked your credit score, and it made you go, “Ah, sh*t,” let’s delve into why it happened. 

Causes of bad credit include: 

• An addiction to buy now, pay later (BNPL), but you forget the pay later part
• Overusing credit—experts recommend using no more than 30% of available credit
• Missing payments or paying late, from parking tickets to medical bills
• Applying for too many credit products at once
• Never using credit (lmao, really), so lenders have no idea if you’re reliable or not
• Closing a credit card/account—more on this later (honestly, finance 🤡)
• Incorrect information on your credit file
• Identity theft

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How Does A Bad Or Nonexistent Credit Score Affect Me?

Your credit score shows lenders/landlords/employers how financially responsible you are. In theory, anyway.

That means it can impact a lot, including:

• Getting a loan with a reasonable interest rate
• Finding a place to rent because a landlord may worry you won’t pay 🎻
• Needing to put a deposit down for utilities in case you don’t pay up
• Paying higher insurance rates, which some states have banned 👏
• Getting a job where you’ll handle money or could receive bribes (like banking and politics, js 👀)

Yep, so it’s basically your entire life. No biggie 🙃 

Dw, we’ve got some tips for you to improve your score.  

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How Can I Improve My Credit Score?

Your FICO score comes from a few things. The main two are payment history (35% of your score) and amounts owed (30%). So being on top of these is crucial.  

First things first, check the info on your credit file is accurate. You might spot a late payment on your file that you know you paid on time. And you can contact the credit score company to fix that. Dw, you can email them.

Next, check how much available credit have... aka what's your credit utilization ratio 😴 Lenders like that to be 30% or under. So, if you could borrow $1,000, only use a maximum of $300. That’ll keep your score looking pretty. 

It’s also worth ensuring your current address and name are on all your financial products. Most people checking your file are conducting know-your-customer (KYC) checks. These ensure you are who you say you are. And different addresses and names can make your credit file look sus 🚩 

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How can closing a credit account negatively impact your score?

We’re gonna make it make sense. 

Let’s continue our $1,000 example. Say you’ve got a maxed-out card with $300 outstanding and an unused account with $700 available. If you close the $700 one, that $300 card is all the credit you have available. So that’s 100% credit utilization. Oops. So don’t do that. 

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Don’t have a credit score because you haven’t borrowed money before?

Sensible borrowing can get you on the map. Read the fine print on any financial products as closely as you do your crush’s social posts. 

Cleo Builder¹ can help you gradually build your credit score. And we don’t need credit checks, either. And the best part? This all comes with a personalized financial assistant in your pocket 💅

Once you’ve got all that sorted, it’s basically a matter of being as financially sensible as you can. Ensure you pay bills on time, pay your debts, and don’t borrow too much money. 

It’s all boring, but you’re taking responsibility for your finances, and that’s a win. Plus, Cleo’s ready to help at any time 💙

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Is Anyone Lending For Bad Credit?

Maybe you’re in a bad spot and wondering if anyone offers a cash advance with bad credit. 

Many companies offer credit services for people with less-than-ideal credit scores. They often come with bigger fees and more interest if you can’t pay on time.

That’s why it’s important to shop around and only borrow money when you truly need to.

Cleo offers a cash advance for bad credit, so she won’t leave you wondering how tf you’re gonna get through the month. The best part about Cleo’s up to $250² cash advance? It has no credit checks and it's freelancer-friendly.

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¹ _{The Cleo Credit Builder subscription offers saving goals, hacks, challenges, APY on savings, credit score insights, cash advances if eligible, credit history, and priority support.}

² _{The Cleo Plus subscription offers saving goals, hacks, challenges, APY on savings, credit score insights, and access to cash advances if eligible.}