What is bad credit?
Bad credit is a prediction made about a person or a company regarding their inability to pay a debt in full within a prescribed time. The prediction is based on the concerned party’s past ability to pay off credit and other related financial factors.
A party’s credit history is formed when they take a loan, pay off bills or use credit cards to make transactions. Now, this credit history is analyzed and the concerned person or company is given a score based on the history which indicates the debtor’s credit risk.
If the allotted score is high then it’s good credit but if the credit score is low then it indicates bad credit. A credit score clearly indicates the borrower’s creditworthiness. A party with a low credit score or bad credit will usually face difficulty in getting a new loan approved and even if approved the interest rate in the loan will be very high.
Steps to fix a bad credit
Getting new credit approved when one has bad credit is difficult. Find out here now how to fix the bad credit:
- Complete details on credit score
One should first figure out what their credit score is and get copies on complete credit reports from various bureau and website. If the credit score is not very low then certain loans can be approved but probably with a high rate of interest.
- Studying and correcting errors in credit reports
The analysis should start by checking the basic information like identity information, one’s name, identification number, address, etc. Then comes checking the credit history; the debts, big purchases list of credit cards. If any error found, should be highlighted and documents supporting the error should be gathered. The proof is required when the error will be reported to the specific bureau.
- No more bad credit
After correcting the errors, one needs to make sure that there are no more unpaid loans or bills. One will have to pay all the bills and debts on time and will have to restrain from applying for credit.
- On time payments
One of the major steps to fix bad credit is to make sure that from thereon there is timely payment of all sorts of bills. Timely payment has a big influence on the credit score.
- Payment of credit card
The outstanding balances on the credit cards should be paid off and further transactions should be done within the credit limits.
- Restrain from applying for new credit
When one has below average credit score they should resist from getting new credit cards because too many credit cards affect the credit score.