Learning from Bad Credit

Bad credit may be the result of a wrong turn, but it doesn’t have to be a dead end. Just because a person has made unfortunate financial decisions in the past doesn’t mean the end of good credit forever.

Don’t beat yourself up about your bad credit score. That’s history. Discover what went wrong. How did you end up with a bad credit report? Learn from the past and do what it takes to fix your credit. Here are a few tips that will help you repair your credit score and keep it in the green.

* Pay your bills on time
* Missed payments? Get current and stay current.
* Trouble making payments? Contact your creditors or a credit counselor.
* Avoid credit repair companies that charge a fee.

Late or missed payments and owing too much money are the two biggest causes of a bad credit rating. Combined, these two factors make up 65 percent of your credit score. The other 35 percent comes from your credit history, how much new credit you have and the mix of different credit types on your records.

FICO, your credit score, is based on the information in your credit reports. One of the first things lenders want to know is “If I lend this person money, will I be paid back in time.” Late or missed payments will lower your FICO score, but you can raise your credit score by re-establishing a good track record of on time payments. This may take time, but stay on course and you’ll be able to push your credit score back into the green.

If you’re strapped and having trouble making payments, don’t wait until you are deluged with letters and phone calls. Contact your creditors to make other payment arrangements. A credit counselor may be a better answer if you have more than a few creditors breathing down your neck. They can often streamline the process of payment arrangements.

Avoid fee based credit repair companies. No one can remove negative but accurate information from a credit report – no matter what they claim. The Federal Trade Commission maintains a web page titled “Credit Repair: Self Help May Be Best.” The web site explains how you can improve your credit without falling victim to the many credit repair scams out there.

You can learn from bad credit. Once you discover where and how you made the wrong turns in the past, you can make course corrections and build a better financial future. The bottom line is that with time, determination and a personal debt repayment plan, you can do it yourself.