Tips for People with Bad Credit

Your credit history is a mirror of your creditworthiness and financial responsibility. It reflects your borrowing activity and payment pattern in the past. People who lend money to you are interested in knowing how well you can manage your money. For them your credit history answers the question: "If I grant this person credit, what are the chances that he or she will pay it off?" Better credit history means better probability to receive the money back. However, not every customer can boast of excellent spotless credit report. If you have bad credit, how can it affect you?

Credit score has a big impact on your life. First of all, it is used to make important decisions concerning your ability to qualify for a credit card or loan. The better your credit history is, the more beneficial credit card terms you can have. Bad credit gives you a hard time to find a suitable offer. The lack of financial responsibility is always associated with higher costs. People with poor credit usually pay an interest rate between 12% - 18% on a credit card, compared with 7%- 12% average.

People who do not directly lend you money (potential employers, insurance companies, apartment landlords, utilities companies and almost anyone else who "lends" you something of significant value) can also be interested in knowing how financially responsible you are.

You can disagree that making late payments has something to do with your job. However, if an employer sees too many late payments on your credit report, he or she can think that you are not responsible. A couple of late credit card payments could be explained as a result of emergency, but more late payments can show that you are absent-minded, careless, not organized, and you spent more money than you could afford. If after making one late payment you don't take efforts to avoid the second one, you can be either a slow learner or you do not have the ability to recognize and solve the problem. These negative qualities will not describe you as a good employee.

The reasons of your credit score drop can be various: you could max out your credit card limit or failed to make payments after an unexpected accident. However, there is a light at the end of the tunnel. A well-considered financial behavior will help you improve your credit.

• The main rule is to pay your bills on time. Collections and delinquent payments will have a negative impact on your credit score.

• Pay attention to the ratio between your available credit limit and remaining balance. If you have a debt, try to keep it less than 30% of your available credit. Otherwise, it may seem that you are close to being overextended.
• Analyze the reasons of your financial problems and change your spending pattern. If you tended to make more purchases than you could afford, try to plan your expenses beforehand and never spend more money than you determined.

• Use your oldest cards to charge a small amount of money and pay it off in full when the statement arrives. The older your credit history, the better. If you do not use your plastics, the banks will have no payments to report to the credit bureaus.
• If you couldn't make ends meet after a life-changing accident - establish a rainy day fund. It will help you make payments if you get into financial trouble.

Building credit history is a time and patience consuming process, but the aim is worth your efforts. Smart financial decisions will help you prove your creditworthiness and ensure your successful financial life in future.

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