Credit catalogues provide shoppers with bad credit with a way of purchasing items from a catalogue (an online shopping store) on credit. Shoppers don’t have to pay the full cost; the catalogues allow them to pay the costs in small installments weekly or monthly. Unlikely other retailers, credit catalogues don’t usually check a shopper’s credit history to offer them goods and services on credit.
While bad credit catalogues benefit individuals with poor credit scores when it comes to shopping for various goods and services, it is important to be wary of their negatives. In this post, we look at some of the cons of using a bad credit catalogue.
What are the negatives of using bad credit catalogues?
The shopping limits, the repayment, low spending lines plus the fact that you cannot open a traditional credit line are some of the basic drawbacks of using credit catalogues. Here are the most common negatives of bad credit catalogues explained;
– They may harm your credit score even more
Though the interest-free spread payments may be tempting, it makes it easy to get further into bad credit. This is especially the case if you fail to repay the entire costs at the end of the interest-free period. You will be liable to pay high-interest rates of up to 30 percent APR, which is more than the overdraft, personal loan or credit card.
So in the unfortunate circumstance that you fail to pay up within the interest-free period, you will probably pay more than the item’s value. The costs may increase, and you may miss payments, resulting in an even poorer credit score. And although a lot of people begin catalogue shopping with either one or two products, you might be tempted to purchase more and more daily. This increases your installments and paying up gets harder. Moreover, late payment also affects credit score negatively and imminently hinders future borrowing from the other lenders.
– High interests on credit cards and loans
If your credit history isn’t that bad or if you don’t have a credit history at all, you can acquire loans and credit cards from some lenders and financial institutions. However, if you have had an account with a bad credit catalogue before, chances are loans or credit cards will come with very high interests. An account with a bad credit catalogue tells lenders that you are the riskier borrower, and they will, therefore, charge high interests to cover the risk.
– Renting an apartment can be difficult
These days, more and more landlords look at the credit histories of prospective tenants. However, not so many are aware of this. Having a bad credit catalogue account, especially one with some missed or late payments can make it very hard for you to rent a house or an apartment. Just like lenders and financial institutions, the landlords assume that you are likely going to miss your rent payments, so they won’t allow you to rent their houses. And in case they allow you, chances are they ask for high security deposits.
The same thing happens when trying to get a cell phone contract. The cell phone network or retailer will check your credit history. If you have a credit catalogue account with a not-so-good payment history, it will be very difficult to acquire a phone contract. The option here is to go for no credit check phone contracts. These, however, have very limited options; you might not get the phone you want on contract.
– Your employability may be negatively affected
This may be a surprise to you, but some employers check the credit histories of prospective employees. This happens more frequently when they are looking for employers to fill posts that involve handling money regularly. When your credit history shows that you have previously had an account with a bad credit catalogue, it spells danger to such employers. They may reject you because they’ll think you are not dependable when it comes to matters finance.
However, it is important to note that most employers look at your credit history not whether or not your credit catalogues. So it’s important that you don’t miss payments when shopping with a credit catalogue. Clear your outstanding bills and pay on time. This way, you’ll be building your credit score, and you will avoid being turned down by potential employers.
– Difficulties getting utility services
This happens less often, but still, with a bad credit catalogue account, some companies may deny you utility services such as water, phone, and electricity services. This is particularly the case if you have been unable to pay up some bills or you’ve had a few late payments. And if such companies decide to offer you their services, chances are they will charge high deposits.
Again, the solution here is paying up your outstanding debts and seeing to it that you do not miss any payments. Remember also that late payment can raise a red flag, so ensure that you pay your bills on time. This is how you build your credit score and get companies and lenders to trust that you can pay your bills on time and regularly.
– Higher premiums on insurance
Insurance firms always look at their potential clients’ credit histories. While most companies won’t mind you using a credit catalogue so long as you don’t have missed or late payments, still, there are some that will use this against you. The fact you are shopping with a bad credit catalogue tells them that you are a high-risk client. Many of such insurance companies think that people using bad credit catalogues are more likely to file claims. They will, therefore, charge higher premiums to cover the risk.
Bad credit catalogues aren’t bad when you do things right. They offer you a great opportunity to start building your credit history again. However, as discussed above, most of the negatives of using credit catalogues are a result of shoppers miss payments or paying their bills late. This way, their credit history is hurt even more, and this affects other things.