What Is Bad Credit and How Can I Fix It?

Bad credit scores can be a bane in your life. It is something that will come back and haunt you if you plan on applying for loans in the future. A lot of people do not even know if their credit score is good or bad until it is too late.  You need to know what your credit score is and make sure that it is at a credit-worthy level.  If you find out that you have a poor credit score, you want to do everything you can in order to fix it before you apply for a loan.  Having an excellent credit score will make you eligible for loans with the best terms.

There are a lot of scenarios that can get you a bad credit score. This score does not necessarily mean that you are an unreliable person. Sometimes, a missed car payment or a pileup of credit card bills can be a big factor on your credit score.  Remember that it is easier to mess up good credit than to fix a bad one.  Fixing your credit score can take years, but the benefits of doing so is totally worth the effort.

A bad credit score can hamper your chances of being approved of a loan. For lenders, you are not a great business prospect and most will reject you.  You present a lot of potential problems.  If they do decide to lend you money, you might get an amount less than what you applied for, a considerably higher rate, and even stiffer penalties for missed payments.  You cannot expect to get the same rosy deals as those offered to people with high credit scores.

The truth is that you will eventually need to avail of some form of credit product.  That is why you need to improve your credit score as soon as possible and maintain it in good condition.  To help you with the process, here are a couple of things that you can do to improve you credit score:

• Great payment record – the easiest way to improve your credit score is to establish a flawless payment record. This means no late or missed payments.  It’s a big mistake to be careless and forget about when you are supposed to pay your bills even if the late payment charges are not a big deal for you.  Late and missed payments on your payment record indicate that you are not financially responsible.

• Use credit cards responsibly – credit cards must be used with the limit on mind. Do not use your credit card for something that you know you’ll have trouble paying off. Also, do not open several credit cards just to have a fallback plan. This can eventually catch up to you and worsen your credit score. Make sure also that you keep your credit card balance under 30% of your overall limit. If you do these things then you can expect a great improvement with your score.

If you are not sure about your credit score, then it is highly suggested that you request for a copy of your credit report.  This way, you can immediately take action if your score needs improving.