Curing Bad Credit

A bad credit history record can be a real nightmare and even a major source for ulcers. It can be financially disturbing and keep a person from getting from just about everything except transactions that are covered with cash.

This can include finding a decent apartment to rent, buying a reliable car, making a down payment for a home, applying for a credit card or getting a loan from a bank. You can be prevented from getting these by having a bad credit history. Banks, businesses and landlords can see a bad credit history a mile away and avoid you like the plague (as it least it feels that way).

Here's the problem: Everything that allows you to build a reliable payment history requires good credit in the first place. So how do you break out of this credit catch-22 once you get stuck in it?

It's frustrating because a bad personal credit rating can almost be smelled by banks and businesses, and you’ll find yourself being rejected from things you didn’t even know you could be rejected from (such as a job or insurance).

I've been there and to me it feels like a bad personal credit rating is the 21st century equivalence to having leprosy. No lender wants to "touch" you. The good news is, unlike leprosy, bad personal credit is usually fixable. Sometimes it’s a very simple matter of paying some forgotten bills, other times it may take more time, but regardless of how bad your credit might be there are likely ways you can improve it.

If you’ve been getting rejected from loans or credit cards lately, chances are it's a bad credit issue.

The first step in repairing bad personal credit is of course finding out if you in fact have it and then more importantly, "why." A good place to start is with your credit report.

There are a number of internet websites today that provide credit reports. While some of these sites are somewhat suspicious, others can provide some valuable insights into your credit history, and explaining why you may have bad personal credit.

The major credit reporting companies include Equifax, Experian and TransUnion (which used to be called TRW).

Oftentimes when someone gets their credit report, the first thing they see is that the bad personal credit is from a forgotten bill or two that were never paid. Missed payments have a tendency to work themselves into ugly marks on a credit rating, and make for a bad credit history picture. Many businesses trying to collect on a late bill will turn to collection agencies, which will in turn wreak havoc on a credit rating, until it's paid. And the collection agency just waits until you go to apply for a loan, then they stand there with their hand out, holding you ransom for your loan, until the collection agency gets paid. Although these collection agencies are always supposed to contact you first, they don’t always succeed in reaching you if you move around a lot, and so you may have been a target for one of these companies without even knowing it.

Of course, some cases of bad personal credit may be more involved than missing a bill payment. And even in the simple cases, some amount of credit repair may be needed after you’ve settled old debts. Additionally, as I learned when I first attempted to get a credit card, having no credit history at all is just about the same as having bad personal credit (that's how it felt at the time).

Additionally, you want to take steps to show that you can make payments responsibly. Use your credit cards often and pay the minimum payments on your bills before their due dates.

If you don’t have a credit card, get a secured card and likewise make your minimum payments promptly. Years ago, there were two companies that offered secured credit cards, Cross Country Bank and Capital One. There's a lot more companies that offer these cards now, including many major banks, and the rates are very competitive.

You can do a Google search for "secured credit cards" and find a lot of useful results. We recommend staying with a major bank secured card, as there's usually fewer "hooks" in their cardholder agreements and from what I've seen, the fees are more reasonable. A while back, I got a Capital One secured card and made the payments on time for 12 months and it really boosted my credit over time.

I've been very satisified with that Capital One card, as they started raising my credit limit to where it's three times the amount I originally started with. Then, other creditors saw that, and they started making me similar offers too.

The thing to remember is that the steps that you take now, as small as they may seem, will add up later on, after a period of good payments.

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