Bad credit can have a serious negative influence on a variety of things in your life...not only can it prevent you from getting the loan that you need or the credit card that you want, but it can also keep you from getting certain jobs or into certain programs.
If you've been plagued with bad credit in the past or wish to take action before your credit gets much worse, you're in luck; with a little bit of work and patience, it's easy enough to begin the process of repairing your bad credit so that you won't have to miss out on these opportunities in the future.
Understanding Bad Credit
One of the first steps to repairing bad credit is taking a moment to make sure that you understand exactly what credit is and what it means to have bad credit. In order to determine a person's credit, potential lenders or other interested parties must request a copy of that person's credit score.
This score is compiled by one of several credit reporting agencies, and is a numerical indicator of how much of a credit risk an individual might be.
Higher scores indicate that the individual has had several positive reports made to the agencies by past lenders, and is therefore considered to be a low risk individual in regards to defaulting on a loan.
Lower scores indicate that the individual has had several negative reports, showing that there is a much higher chance that the individual might default.
Removing Old Debts
Obviously, one of the key factors in improving your credit score is stopping old creditors from continuing to make negative reports to the credit reporting agencies. In order to do this, you need to get the creditors what they want... the money to repay the loan or credit line. By repaying these old debts, you can eliminate the source of many negative reports.
The damage that has already been done to your credit score will remain, but the debt will be reported as satisfactorily repaid and there will be no additional negative reports filed because of that particular debt.
This is important, because one of the first steps in making things better is to make sure that they don't continue to get worse.
Establishing Positive Reports
Once you've managed to repay some of your old debts so that they can't damage your credit report any longer, it's time to start adding positive reports to help even out your credit score.
There are several ways that you can do this, including opening a new savings or chequeing account, applying for a credit card that's designed for those with bad credit and keeping the balance low, or even refinancing with a home equity loan to pay off several old debts at once.
Regardless of the method that you choose, it's important to stay current with any new payments that you may have... after all, you don't want to start collecting negative reports again.
Expiration of Old Reports
The good news is that the negative reports that you've had in the past will go away... the bad news is that it can take 5 to 7 years before the reports expire and stop affecting your credit score.
This is where patience comes into play; though your credit score might begin to rise slightly after you've repaid old debts and established new credit lines, it will still take time to undo the damage that has been done over the years.
The older reports will expire in time, though, and the new positive reports will take their place.
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About the Author
John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the www.directonlineloans.co.uk website.