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How to Deal With Your Bad Credit

Updated on April 5, 2009

One of the main reasons why a person fails to get a loan approval is because of bad credit history. Some have to secure their loans with collateral with properties like house, cars, and jewelries. This makes it essential to understand the essence of bad credit. What is it? What causes bad credit? Are their steps you can do to prevent? What are the things you should do if you have one?

What is a bad credit?

If you are going to apply for any type of loan, the lender will have to check your credit history and credit rating. You have a bad credit if your credit rating is low and your credit history is bad. Lenders need to check your credit history to find out how responsible you are with your debts and previous loans. Are you prompt with your payments? Do you have history of missing your monthly dues? Lenders need this information to decide if whether or not they should approve your loan application.

Even if there is debt consolidation loan with bad credit, you have to be careful with your credit rating. Your credit rating represents your ability to pay your dues on time. This way, you will be able to get the loan when you need it.

How do you get bad credit?

In order to prevent having a bad credit, you have to understand why you get it in the first place. What causes it? Here are some of the reasons why you get a bad credit:

·         Making late payments is one of the reasons of getting a bad credit. Not paying your bills on time affects your credit ratings. This will tell a lender that you do not have the capacity to pay your debts or that you are not responsible enough to take care of them in a timely basis.

 

·         Another major cause of bad credit is missing your payment. If late payments is bad, what more with missed payments?

 

·         Charge off is another. This happens when a credit company charges your unpaid debt to bad debts. The company can no longer collect these debts because the debtors are ignoring them and showing no interest of paying them at all. If a company charges off your debt, it is going to stay on your credit report for seven years.

 

·         Identity theft is also one thing. Many people are unaware that they are already victims of this. This happens when a person use your information to apply for credits and use it for their gain. This makes it essential for you to monitor your credit reports regularly and check the purchases made under your name.

 

·         Repossessions and foreclosure are two major causes of bad credit as well. If you sense that you can no longer afford to pay the property, make the necessary actions. If you can, sell the property and pay the lender or bank of the amount you owe. You can also renegotiate with the lenders. If you do not reach an agreement, seek professional help.

 

·         Bankruptcy is another major cause of bad credit. Prevent this as much as possible.

What to do with your bad credit?

If you already have a bad credit due to mismanaged debts, check out non profit debt consolidation services. These programs will help you get your credit back on track and assist you in paying off your debts. Although they can assist you, it is not that easy to turn your bad credit around.

Here are some of the steps you can take to revitalize your credit record:

1.      Check your credit reports. This way, you can detect anomalous entries right away and file a dispute.

 

2.      Make on time payments. If you are late in one of your payments, make sure that it does not happen again. Pay your obligations on or before its due date.

 

3.      Catch up with your missed payments. It is important that you make up for your missed payments right away. Credit scores take into account the period when your obligation remained unsettled.

 

4.      Ask assistance from counselors. Several services offer ways and means to manage your credit. Counselors will not only represent you to creditors, they will also give you advices on how to turn your bad credit around.

Your credit rating is vital for the approval of your loans. That is why you have to take care of your credits properly. If you have bad credit scores, take the necessary steps to turn it around.

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