You hear all the time why it’s essential to increase your credit score to get approved for home and car loans. However, there are potential downsides of a good credit score. Before altering your finances to increase your credit, consider some of the limitations of good credit.
This guide from Delaware Title Loans, Inc. will go over some of the disadvantages of increasing your credit score. We will also explain how you can get personal loans regardless of your credit score, such as title loans and installment loans.
Four Downsides Of A Good Credit Score
While there are plenty of advantages to having a good credit score, there are disadvantages that you also must consider. Before increasing your credit score, it’s essential to understand these potential pitfalls to avoid mistakes. Having good credit is one thing; taking advantage of it is entirely different.
The following are four of the downsides of a good credit score:
1. You Might Be Tempted To Raise Your Credit Limit
A credit limit is the maximum amount a lender will allow you to spend using a certain credit card or a line of credit. Your credit limit is crucial as it directly impacts your score. The credit utilization ratio (the amount of debt you have divided by the total credit you have access to) can account for anywhere between 20% and 30% of your score.
Ideally, you would want to keep your credit utilization in single digits, but anything below 30% is considered a good result. If you have a good credit score and express strong financial habits, your credit card provider might increase your limit automatically. You can also choose to ask for an increase, which will likely get accepted because you have already proven that you can manage credit.
An increased credit limit can potentially increase your score by lowering your credit utilization if you do not change your spending habits. Those who know that they have a high credit limit might end up spending a lot more. For example, it might be tempting to make a big purchase that you would have to otherwise save up for. As a result, your credit utilization will increase and your score will drop.
2. Missed Payments Can Cause Significant Score Drops
Payment history is your track record of paying your accounts over the length of your credit. This important factor accounts for about 35% of your FICO Score.
Some of the components that make up your payment history include:
- Payment information on loans, credit cards, and other types of accounts
- The number of accounts that you’re managing to pay as agreed
- How overdue delinquent payments are
- The amount owed on delinquent accounts, and more
We all know that late payments can affect credit scores. However, one of the limitations of good credit is that people with higher scores might actually have to face a more dramatic drop.
Those with lower credit scores already have their ‘poor behavior’ reflected in their report, so another missed payment might not have such a drastic effect on the overall number. However, for those with good and excellent scores, a single missed payment can easily drag the score massively. The higher your score, the greater the negative effect a 30- or 90-day missed payment will have on the account.
3. Increased Risk Of Identity Theft
It makes sense that those with a good credit score will be more exposed to identity theft. Why would someone want to steal your identity if you have a poor credit score? They will only be able to benefit from someone with an excellent credit score, as they can exploit their clean credit score to take out loans or open credit accounts, causing major financial losses.
Whether you have good credit or not, it’s crucial to keep yourself protected from potential identity theft. It can happen to anyone, and you must ensure you are taking the right steps to avoid financial losses from identity theft.
The following are some ways to prevent identity theft:
- Use strong passwords
- Enable two-factor authentication on your banking applications
- Only provide credit card and bank information on secure websites
- Check your bank account regularly for unauthorized charges
- Stay alert to phishing scams
- Limit the amount of credit card information you store online
4. Borrowing More Than You Can Afford To Repay
The higher your credit score, the more you can borrow from traditional bank loans. While it may seem like an advantage to borrow more money during an emergency, this can lead to a debt spiral. Borrowing more money than you can comfortably manage can lead to financial strain.
Just because you can borrow more money doesn’t mean you should. Borrowing more than you need and failing to repay what you owe can plummet your credit score and lead to massive debt. You may also borrow a lot of money, thinking you can afford repayment, but suffer a job loss that leaves you unable to repay the loan. Protect yourself from this downside by only borrowing what you need.
Getting An Emergency Loan With Bad Credit
If you’re still trying to boost your credit score and experience a financial emergency, Delaware Title Loans, Inc. can help with our emergency loans. They allow borrowers with bad credit to still get approved for emergency cash.
The following are the two Delaware loans we offer to those with bad credit:
- Title loans: This is a secured loan using your lien-free car title. Borrowers who have paid off their cars fully can receive up to $15,000, with the title loan amount depending on your car’s value. The required items you will need are your driver’s license, a lien-free car title, and your car for an inspection.
- Signature installment loans: If you have not fully paid off your car, you can opt for signature installment loans. They allow you to borrow money as long as you agree to repay the loan in fixed installment payments. You can borrow up to $1,500 if you have the following items: a state-issued photo ID, a checking account statement in your name, and proof of income.
Thankfully, the process for getting approved for both of these loans only requires a few steps. Submit your information online, speak to a loan agent over the phone, and get verified in person. After signing loan documents, you can receive your emergency cash the same day you apply or the next business day.
Why Choose Delaware Title Loans, Inc.?
Whether you have good or bad credit, nobody is safe from unexpected emergencies. If you ever find yourself in a situation where you urgently need extra cash, a loan can become an option.
Here are a few reasons why you might want to choose to work with our professionals at Delaware Title Loans, Inc.:
- We welcome all credit situations: Whether you have good, bad, or non-existent credit, we are ready to help. For most loan amounts, our experts will consider all credit types, as we are firm believers that your score should not prevent you from getting the money that you need.
- The process is extremely fast: Once you meet with one of our representatives, the whole process might take as little as 30 minutes. Furthermore, you won’t have to wait for several days to finally get your hands on the money. If you do get approved, you might get access to the funds the same day or the following bank day.
- We have seven convenient store locations: We have store locations in Wilmington, Dover, Claymont, etc. Once you arrive, one of our friendly loan representatives can guide you through the process with excellent customer service. Apply today and get approved in person in less than 30 minutes.
Borrow Money With Emergency Loans In Delaware – Receive Emergency Cash Today
While trying to boost your credit score, a financial emergency can happen that Delaware Title Loans, Inc. can help you afford. Our title loans and installment loans offer fast financial relief. You can get approved regardless of your credit score and borrow money in less than 24 hours.
Ready to get the emergency money you need? Submit your information through our online contact form or call us to provide your details over the phone!
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.
