We all know what bad credit can do to our ability to get financial help when
it is needed the most. Although, it is a part of life, things do get out of
hand; missing payments and piling up debts; we dont always control everything
that happens to us in life. But that does not make bad credit less damaging,
anyway. Bad credit could readily make a bad situation worse. It prevents you
from getting loans, financial help or credit cards, or makes you pay
neck-breaking interests on loans. Since we all will need credit someday, the
earlier you start doing something about that bad credit, the better. It sure
will be no good to pay off debts just before requesting credit, because most
lenders are more interested in your financial history.
It may not be so easy to repair bad credit, but there are steps you can take
to make the whole process easier. So, when you find yourself in such a
situation, the following advice could be of great help.
I think the first port of call should be the credit bureaus responsible for
providing credit reports in your locality or country. Each country has
established credit bureaus with the task of monitoring your credit performance,
as reported by financial institutions and you can always get your credit report
from these bureaus, free or for a fee, depending on your country. If there is
more than one established bureau, you may want to get each bodys version of
your report. It affords you the privilege of comparing the different versions.
The reason why the reports may differ is that they are prepared based on the
information supplied to the bureaus and it is possible they get different
information about your accounts from different reporters.
Once you have the reports, scour them for errors. Dont be surprised to find
mistakes or negative comments that are not true in your reports, it happens. You
will also want to take note of credits that have been cleared but are still
showing in your report, or accounts you cannot remember opening. Fraudsters do
open accounts in peoples names only to clear out the credit when the attached
credit line gets reasonable. These are all very bad for your credit rating. You
may also find scathing negative comments in your report. For a start, you will
need to clear all these anomalies. Get accounts that are not yours removed from
your credit report. Talk to creditors who are reporting negative comments about
you or still showing bad debts that have been paid. You may be pleasantly
surprised at how many creditors are willing to cooperate once you have explained
your situation. The bottom line is communication. Talk to creditors; explain the
situations you are facing. People cant help you if you dont tell them what you
are experiencing. Besides, you can file a dispute, if you are sure some negative
comments or bad debts are not supposed to be on your credit and the creditor
dont want to cooperate, especially when you have documents to back up your
claims.
There are times when the scathing comments on your report are indeed true.
However, if your account is in a good condition now, you could still talk with
the creditors and arrange to get the comments removed from your report. Your
credit report will look better with fewer of those negative comments. Another
factor that needs to be considered is the amount of debts hanging round your
neck. Too much debt, definitely, spells pending financial crisis and a low
credit rating. Lenders will be reluctant to grants loans or credit lines, if
your report shows significant debts, even if you have re-paid most of the debts.
Too much debt is a sign of financial recklessness, it does a heck of a lot of
damage to your credit rating. The ugliest side of the story is that you will be
required to pay higher interest rates for loans if your credit is bad, to cover
the risk of lending you money. It is wise a idea to keep debts less than 30% of
your limits and to pay off debts with the highest interests rates first.
Just as too many accounts will pull down your credit, too few accounts may
also be harmful. If you dont have enough established accounts, your credit may
be poorer than it should be. Adding departmental store or gas cards account that
are in good standing to your credit report will surely boost your credit
standing. Another idea is to get a loan or credit card and buy something you
know you can pay for quickly. Re-paying debts on small loans or credit card
purchases quickly will speed up your chances of repairing bad credit.
Bad credit is not a thing to get over with in a hurry. It takes time and
requires patience. Take your time, clear your debts gradually beginning with
those with the highest interests rates. Your seriousness in dealing with past
debts could impress lenders and show them you are financially serious and
reliable. Whatever you do, remember that you are affecting your financial
future.
Michael Russell
