Your credit score reflects your financial stability and responsibility. Credit scores are calculated based on your debt-to-income ratio, payment history, length of credit history, types of credit used and new credit inquiries.
It’s used by lenders, landlords, and even employers to determine how risky it would be to do business with or hire you. The consequences of bad credit can haunt you for years, making it difficult to get loans or even rent an apartment. But having bad credit can also take a toll on your mental health. Money worries can lead to stress, anxiety, and depression.
Here are some fast facts and figures:
- 1 in 5 American adults live with mental illness
- $15.6 trillion: The amount of consumer debt in America
- More than 191 million Americans have credit cards
- Total bankruptcy filings in 2021: 401,398
- The average household credit card debt is $5,315
- 16% of Americans have bad credit
The link between bad credit and mental health
It’s no secret that bad credit can negatively affect your financial wellbeing. But did you know that it can also lead to mental health problems?
A study by the University of Nottingham found that people with bad credit are more likely to experience anxiety and suffer from depression. The research showed that bad credit can cause as much psychological distress as losing a loved one or suffering from a serious illness.
And it’s not just the strain of dealing with debt that can lead to mental health problems. The constant worry about money and the fear of being rejected for credit can also take their toll. If you’re struggling to cope with bad credit, it’s important to seek help from a qualified professional. They can help you to understand your options and help you make a plan to improve your financial situation.
How to cope if you have bad credit
The good news is that you can take a number of steps to improve your credit score and reduce your stress levels.
First, make sure you keep up with your payments on time. Over time, this will greatly improve your credit score. Second, try to keep your balances low. This will improve your credit utilization ratio – another critical factor to consider for your credit score.
Consider using credit counseling services if you need help getting your finances back on track. These services can help you create a budget and set up a payment plan that works for you. Finally, remember that bad credit is not the end of the world. With some effort and perseverance, you can improve your credit score and get back on track financially.
Learn how to maintain a good credit score for the long term
A good credit score can mean the difference between getting approved for a loan and being denied or paying a higher interest rate. Conversely, a bad credit score can lead to higher insurance premiums and even difficulty renting an apartment.
That’s why it’s so important to learn how to maintain a good credit score for the long term. There are certain precautions you can take to improve your credit score:
- See what’s impacting your credit score and get advice on how to fix it. If you understand your creditworthiness, you can take steps to improve your financial health.
- Get alerts when something changes with your credit report. Receive notifications whenever a new item appears on your credit report, so you can stay on top of your credit health.
- Compare your credit score to others in your age group. Conduct a quick search online and compare your credit score to see where you fall in the range.
Resources for those struggling with mental health issues
If you’re struggling with the side effects of bad credit and mental health issues, don’t give up hope. There are plenty of resources available to help you get the care you need.
- Many mental health resources are available at no cost or for a very low fee. You can look online or in your community for these options.
- Check with your insurance company. Some insurance plans cover mental health services, so it’s worth checking to see what your coverage includes.
- Look for government assistance programs. If you’re struggling to pay for mental health care, these programs could help you cover the costs.
- Talk to your doctor. Your primary care doctor may be able to refer you to a mental health professional or provide other resources and information.
Final thoughts
Improving your credit score will take some effort but it will be well worth it over time. The infographic below provides some great self-care tips for managing your finances and reducing stress. If you need additional help, please don’t hesitate to reach out to one of the many organizations that specialize in either financial counseling or mental health. Managing your money may be difficult, but it’s important, and with the right tools and support, you can overcome any obstacle.
Article edited and fact checked by our editorial team.