Gotten Some Bad Credit On Your Permanent Record?

Article Written By: StevenJ.Talrechi

If you're in a bit of a financial struggle lately, don't worry. Many people are. And as with anyone, it's likely that this financial struggle has probably affected your credit rating. If this is true, don't worry.

People are slapped with bad credit ratings for several reasons. In many cases, it's through no fault of their own. As an example, you might get a bad credit score just because someone at the credit bureau itself mistakenly entered inaccurate data. It may also be that you have a very common name, for example, and someone sharing your name defaulted on a loan, went into bankruptcy, or had some other financial hardship situation, and that person's information got entered in your credit report. Other situations include a recent move, where a credit card bill got lost in the mail and you forgot to pay it. Although this can be expensive, it's an honest mistake. Certainly, it should not so adversely affect your credit report.

If you have a bad credit rating, this does not mean that your reputation or access to financial services is damaged forever. Indeed, you can fix this situation almost immediately, but you have to do some work to do that. However, if you are consistently behind on financial payments, or have other financial struggles that are andquot;permanent,andquot; this is not a quick fix situation and credit counseling may be the best bet for you.

Indeed, bad credit is so common that the US Trustee Program of the Department Of Justice has approved of credit counseling agencies so that they can help people with credit difficulties. Their web site is www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm, and there are a list of credit counseling agencies available in your area that you can contact to help you.

Reasons for Bad Credit: In some cases, of course, you can control the reasons you have bad credit, such as over-shopping and using credit cards carelessly. However, many times, the reasons you get into financial difficulty are beyond your control. For example, as previously mentioned, someone at the credit bureau may incorrectly enter information. Therefore, correcting the error made rectifies these types of bad credit situations.

Other reasons you might have bad credit is if you lose your job or are laid off. Unforeseen, this is an increasingly common situation in today's job environment. In turn, this will affect how and when you can pay your bills, so even if you've been a very responsible consumer previously, if you suddenly have substantially reduced or no income, you will have great trouble paying your bills and therefore will look irresponsible, even though the actual difficulty is through no fault of your own.

A second reason this type of difficulty may occur is if you are facing foreclosure on your home. Even if you have a steady job, you can still face the situation. Many people bought overpriced homes in the previously inflated real estate market, and did so through lenders who were willing to cut corners to help them buy homes they really could not afford. Many of these homes also came with such substandard elements as adjustable-rate mortgages, which is where the rate starts out at a reasonable level that the homeowner can easily afford. However, then rates can suddenly spike with no warning, wherein the payment increases by several hundred to even a thousand or more dollars a month. In these cases, often foreclosure was the only way out of such a situation, which in turn affects the homeowner's situation.

Another situation you might find yourself facing is divorce. In fact, credit counselors have said that this is a very common reason for a sudden bad credit rating. Because assets have to be divided up between former spouses, and because there are often alimony and child support payments to consider, income that was previously adequate suddenly doesn't go as far as it used to.

Still another reason for bad credit is if your health is failing or if you are suddenly facing substantial medical expenses that cannot be avoided and yet that you cannot afford. With substandard or no medical insurance becoming an increasingly common situation, many individuals find themselves facing serious illnesses that they must take care of, yet cannot afford.

Finally, the one situation that many Americans find themselves in and that can be avoided is simply overspending on andquot;frivolousandquot; expenses that they don't need. To do this, they andquot;borrowandquot; money from credit cards to live beyond their means when it's simply not necessary. Increasingly, today, society lives on andquot;plastic,andquot; and many people have 2, 3, 4 or more credit cards that they use at will to buy things on credit they could easily do without. When it gets bad enough, even minimum payments are impossible to make and this can cause an adverse credit rating.

Avoiding Bad Credit Here's the golden rule on bad credit: before making any major purchases, request for a free copy of your credit report from Equifax or Trans Union. When you read something that you believe is false or inaccurate in the report, write a letter immediately and ask for proof or ask that the report be corrected immediately. Whatever you say to the credit bureau should be executed in writing. This is the only way you can show proof that you acted in good faith. Don't wait for weeks before questioning your credit report.

To further avoid bad credit and maintain healthy credit rating, you should:

Take stock of your financial situation - jot down all sources of your income and how you're going to spend that income. Create a budget and stick to it. Discipline in spending works in your favor - banks are more predisposed to lending money to individuals who exhibit prudence;

Really understand what you NEED to spend money on. We are a nation of excess. Frivolous expenses must be avoided while trying to repair your credit rating.

When you pay off debt, pay off the highest interest rate cards first. To do this, make the minimum payments on all of your other cards, then take the highest interest rate card and put all of your available andquot;debtandquot; cash toward that payment. Do this until you have paid off your highest interest rate card, then go on to the next. Make minimum payments on all of the lower interest rate cards, then take your highest interest rate card that still has a balance on it, and pay as much toward that as you can. You'll soon see that you can be debt free very quickly, as long as you practice discipline and diligence.

Finally, make sure you pay your bills on time. Making mortgage, utility, tax and other bill payments on time shows that you are diligent and prudent in your spending practices and this will reflect positively in your credit report. So if you've got bad credit, don't panic. Simply taking some care to pay bills on time and be prudent in your spending, as well as keeping a careful watch on your credit reports from all three bureaus, will bring you back to good standing in very little time.

About the Author

Steven J. Talrechi has been writing about credit reporting and credit reporting practices for over 10 years. He specializes in helping people obtain a second chance checking account and second chance bank account when they have been turned down by banks. This and other unique content 'credit repair' articles are available with free reprint rights.

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This Article Has Been Published on Tue, 25 Dec 2007 and Read 213 Times

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