How to Deal with Bad Credit

The full significance of having bad credit is now understood by more and more people everyday. Bad credit labels you as a bad risk, not only in the eyes of creditors but also by potential employers and insurance companies. Having a clean driving record is not as important as having a good credit score when it comes time to renew your auto insurance, and losing a job you need because you have bad credit despite being qualified and suitable for the position, just enforces the message that your credit score counts. Bad credit will work against you and you need to know how to deal with bad credit to improve it.

Your credit score as assessed by Fico is an amalgamation of information for the three main credit bureaus, Experian, Equifax and TransUnion, so it is important if you want to do something about your bad credit to obtain your free annual report from each of the bureaus. Possibly there may be erroneous information recorded on your reports which you can have corrected.

However if you have bad credit because you have a history of late or missed payments, bankruptcy, or defaults, these are an accurate reflection of how you have conducted your finances and cannot be altered. In such circumstances all you can do is improve your credit score by using all credit in a responsible way in the future.

There is no mystery involved in how to improve your credit score as Fico give full disclosure as to how their scoring algorithm is calculated. It is based on your length of credit history, debt ratio, timeliness of payments and how often you apply for credit. It is important to never use more than 30% of your available credit and always pay on time. Don’t cut up older credit cards but keep them open and use them occasionally and don’t chase after every credit offer you see.

You can even purchase through Fico a special kit for just under $50 to help you improve your credit score. There are also Fico forums for you to compare scores and share information with other people trying to improve their bad credit too, much in the way that online dieters chat about pounds lost.

The best way to improve bad credit is ironically to use more credit, which will inevitably cost you more to do if you have bad credit. However careful use of credit cards for one year will go a significant way to improving your overall credit score, as your latest activity is given most importance.