Do you have bad credit history? First, determine whether or not your credit history is as bad as you think it is. The first indication that your credit is about to turn sour is that your about to max out your credit cards. Another indication is that you keep opening up other credit cards as you max out your current cards. Lastly, when you start only paying off the minimum amount on your cards and keep opening up new accounts, you are on a one way ticket to bad credit. You might think to yourself, “Having bad credit history won’t hurt me that much”. However, there are so many areas of your life that can be affected once your credit score goes into the dumps.

Most lenders review the FICO credit score which ranges from 850 (perfect) to 300 (worst). A FICO score of around 700 plus means a very good credit score. Anything over 750+ is considered excellent. If your within this range and can prove that you have three months of steady income, then you will be able to get very favorable interest rates. From 700 to 680 is considered good and from 680 to 620 is OK. However, anything under 620 will put you in the subprime category. Basically anything from 520 and below is starting to get into the poor to bad category.

If your FICO score is from 580 and below, you better start preparing yourself for the effects of bad credit and better repair your credit score. Go ahead and check your credit score using a credit report website such as Experian or TransUnion. Here are the repercussions for being within the “bad” category. First of all, good luck getting a loan or a loan with favorable terms. The worse your credit score is the higher; the interest rates will be on loans (if you can even obtain one). The reason for this is because as a bad credit history borrower, statistically, you are more likely to default on your bad credit history loan more than people with excellent credit. This means that lenders are taking a risk on you and need to be compensated for taking that risk. Bad credit will affect where you can live as apartment tenants are checking people’s credit history to determine whether you as the renter can make payments on time. People with higher credit ratings tend to be more reliable with timely payments. You will have to pay higher insurance premiums on your car because bad credit people tend to make more claims than people with good credit. If you do not already have a cell phone, obtaining a cell phone might be a difficult task because cell phone companies check credit ratings. You might have to get a undesirable prepaid phone if your credit is too bad to get full-service from a phone provider. Lastly, many employers are checking future employee’s credit report to determine whether or not they are trustworthy and diligent people. Also, if you are thinking about purchasing a house in the future, remember that home equity loans for people with bad credit are hard to obtain. 

Now that you know the damaging effects of a bad credit history, what are ways that you can repair it? The first thing you need to do is STOP using your credit cards and opening new accounts. Cut up your credit cards and focus on repaying your debt, not creating more. If possible, do not use a debt settlement agency as this could possibly affect your credit score and make it worse than it already is. If you must negotiate with your creditors, negotiate your own credit card debt. Consolidating your debt and extending your loan payments over time will ensure that you will only have to pay one lender and will have the ability to pay a lower monthly payment. When your income is high enough, budget your disposable income around our credit payments and start focusing on repaying back your credit cards. On the lines of debt consolidation, try to avoid bankruptcy as this can damage your credit history for a very long time. Bankruptcy can stay on your credit history for up to ten years. Once you have performed “damage control” on your debt, and then apply for a secured or low limit bad credit history credit card. If you cannot get one of these, then get a co-signer to help you get a credit card. Credit cards for bad credit history will have very low limits and might require a prepayment of twenty percent. You’ll need to start building up your credit history again so you can plan for future purchases. Only use your credit card a few times a month to purchase small items such as gasoline or a few groceries. Last, if there are any items on your credit report that you would like to dispute, go ahead and dispute all the negative items on your credit report.