Bad Credit


Bad credit occurs when you fail to pay your debts on time; if you pay at all. Credit bureaus accumulate the credit history of late payments and loan defaults and compile a credit report. A negative series of events like sending your accounts to the collection agency, filing for bankruptcy, having your vehicles seized sends out bad signals in the market. Lenders and industry clients become cautious of working with you. The information in the credit score is used to evaluate the credit score which is a three-digit figure. This figure appears in the range of 300-850 and low credit scores are an indication of bad credit.

While a bad credit is a grave situation, some people are sometimes not even aware of their bad credit scores. U.S citizens have access to free credit reports once a year. Check your credit reports to see what has led to bad credit scores. There are no shortcuts to repair a bad credit. It has to be done patiently over time. We will now discuss steps to fix bad credit.

Analyze the credit report
Request a free copy of your credit report and check for errors. Also, ensure that no late payments have been listed incorrectly. In case, you find any mistakes, you can take up your case with the credit bureau.

Make all your future credit payments in a timely manner
Making your payments on time is the most important factor for improving credit scores. These payment reminders could be sent by banks through their online portals via a text message or an email. You could also opt for automatic payments through your credit card or bank. Loan providers could also receive payments directly through your bank accounts. But this system tends to only cover the minimum payment on your credit card.

Pay your debts
More than improving the credit score, you should work towards paying back your debts. Stop using your credit card and check your balance in all your bank accounts. Make a list of all your accounts and the amount you owe on each account and the interest being charged to you. Devise a payment plan and start off by paying your debts for accounts where the interest rates are the highest. Continue with minimum payments in other accounts.

Wrap-up
While a bad credit is a bad mark on your reputation, your credit score can still improve. Closing a bank account will not do away with the loan. Nor opening a new account will help you get a better credit score. Credit cards have to be managed well and installment loans should be paid timely. With patience and discipline, you will eventually improve your credit scores.