Bad Credit

If you have bad credit, your financial condition will only get worse unless you become proactive in protecting and/or rebuilding your credit standing. Mortgages and personal loans are not the only places you will pay for a bad credit rating. Insurance companies and auto loan lenders use your bad credit score to help determine your policy rate or the interest rate of your car loan. Along with your claims history, insurers see a bad credit rating as a sign that you are more likely to claim damages. And if you plan to buy a car, a bad credit rating could rev up your interest rate to over 200 percent more than that of a person with excellent credit. A persistent history of missing credit card payments could also impact your job prospects, as some employers check the credit rating of applicants. In many cases, those with bad credit are denied housing, utilities and insurance. You must stop the financial hemorrhaging; take control.

It should go without saying, to improve your bad credit, you must have household income. You must find and/or keep the most suitable employment. You may need to work two jobs. You might consider selling anything you don't really need, especially if you are paying to have it stored. Live within your means - don't spend more than you bring home.

The first step to take in improving bad credit is to pay off or settle as many outstanding debts as possible. Lenders advise that keeping a high debt-to-income ratio will adversely affect your credit rating. Reduce your balance on all revolving credit accounts to below 45% of your gross earnings. This will demonstrate that you do not live on credit, and have planned for possible unforeseen needs of that available credit.

Call your creditors and negotiate some of the terms on your account. You may be able to lower interest rates, stop late fees, eliminate over-the-limit charges, and in some cases settle a debt by making a partial payment in lieu of the total amount due. It is a myth that credit card companies aren't willing to work with you. Most are, if you will make an honest effort. Pick up the phone and show your good intent to pay your obligation. Let them know, you don't want bad credit. Then you may be able to avoid credit repair issues.

We are often asked, "How can I fix my bad credit, and how can I raise my credit score?" Under the Fair Credit Reporting Act, you can dispute information in your credit files with the three credit repositories, and the creditor is required by law to verify the disputed information. That which can't be verified within 30 days must be removed. While bad credit repair can be a do-it-yourself project, it is time consuming and tedious.

Once you have taken the above steps to reduce debt, and clean up your bad credit, it is time to start rebuilding your bad credit. This may sound contradictory, but the best way to rebuild bad credit is to obtain credit. There are lenders that will grant credit to high risk consumers. Once you have a credit card, your proper use is reported to the credit bureaus. Secured credit cards are a good way to build credit. Be careful not to fall victim to certain credit rebuilder programs that charge application fees, a high annual fee, and monthly participation fees.