Sunday, May 11, 2008

Options for Individuals with Bad Credit

If you've had problems with your credit in the past, you might think that your options are extremely limited in regards to financial matters. While it's true that it can be more difficult to find loans and credit cards when you have bad credit, that doesn't mean that it's impossible.

In fact, there are some banks and other lenders that make a point of supplying those individuals who have bad credit with the loans or other services that they need.

Not only can this fill the need that they have for financial services, but they also may be able to improve their credit rating while making payments on their new loan or credit card.

Below you'll find some information on how your credit becomes bad, what you can do to fix it, and what loan and credit card options are available for you even if you do have bad credit.

Defining Bad Credit

The first step in getting rid of bad credit is knowing exactly what it means to have bad credit. Basically, having bad credit means that you've had problems making payments in the past… unfortunately, it was more than just once or twice.

Each time you miss a payment, there is the potential for a negative report appearing on your credit score… miss enough payment dates, and the negative reports start to drag down your credit score.

The lower your credit score is, the worse your credit rating is… and the negative reports that are filed on your credit history can last for up to seven years before they expire.

Credit Repair

It is possible to fix your credit and improve your credit score, but it can take time… don't be fooled by advertisements that say that they can fix it instantly, because not only is it untrue but in some of the cases what they do can also be illegal. In order to fix your credit rating and improve your score, you'll need to begin repaying some of your old debts so that they stop adding new negative reports as well as begin establishing new lines of credit so that you can get positive reports added to help bring up your score faster.

Once you've repaid your old debts and begun making regular payments on your new debts, you might have to wait a bit before your score starts to improve… after all, you're not going to fix years worth of credit problems in just a few weeks. As time goes by, however, your positive reports will begin to outweigh the negative; at the same time, your older negative reports will begin to expire.

It's important to make sure that you keep up with your new payments, though… you don't want to start causing further credit damage after you've finally begun to improve your score.

Loan and Credit Card Options

There are a variety of loan and credit card options available for individuals with bad credit, both at banking and finance companies as well as online.

It's important to remember that you'll be paying a much higher interest rate than you might with a good credit rating, however, so you should take care to do a bit of shopping around so as to find the best interest rate that you can. The collateral that you use will also make a difference, as high-value collateral can reduce interest rates even on bad-credit loans.

Choose your loan or credit card carefully, making sure that you'll be able to keep up with the payments, and you should be well on your way to a new credit rating.

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