How to Improve a Bad Credit Rating

December 7, 2009

A bad credit rating occurs when a consumer fails to comply with the terms and conditions of one or more credit agreements. Transgressions range from as little as a late payment to filing for bankruptcy. The more serious the default, the more likely it is to cause a low credit score. Poor credit can show on a credit report for up to 10 years (chapter 7 bankruptcy), although 7 years is more probable.
Improve a Bad Credit Rating

Credit report repair is a gradual process that takes many months before it starts to work. The only sure-fire way to recover from a low credit score is to make punctual repayments now and in the future. The past cannot be changed (with the exception of credit report errors), but making payment on-time will be reported to credit reference agencies. Paying the mortgage, credit card bills and loan agreements punctually will be highly beneficial to the customer.
Recover from a Low Credit Score with Credit Repair Cards

Should a consumer have entered a debt settlement program to reduce their income-to-debt ratio, there may not be any active credit agreements remaining. Those who face this issue could benefit from signing-up to a bad credit rating credit card. The lender will report reliable repayments to credit reference agencies which will help to gradually improve a bad credit rating.
Eliminate Credit Report Errors

It doesn't matter whether a bad credit rating occurred as a result of a missed payment or an error, it will still result in a decline. A number of credit reports contain glaring errors because people are involved in the data entry process. It is important to order a free credit report to check it for any problems. These issues can be corrected personally or with the help of a licensed attorney.
Avoid Excessive Credit Searches

When a consumer applies for a loan, credit card or mortgage, a record of that application is recorded for exactly 12 months. Whilst this may not sound like a bad thing, it can result in a decline. Too many credit searches can be construed as a sign that someone has too much credit or even be indicative of fraud so it is important to only apply for finance when the product is absolutely right.

Reduced Income-to-Debt Ratio

The amount of debt relative to income accounts for up to 35% of an individual's FICO score. Those who already have a delinquent account could benefit from signing-up to a debt management plan or debt settlement program as these will help to reduce that person's income-to-debt ratio. It is a better alternative than leaving an account unpaid and can help to restore order to personal finances.
How Credit Report Repair Works

A low credit score cannot be changed over night, but making a series of punctual repayments will help considerably. Those who don't have active agreements could stand to benefit from taking out a credit repair card. Be sure to get any credit report errors corrected at least 6 months before applying for credit.