Bad Credit and Your Credit Rating

Bad credit generates a poor credit score. The reason for this may be due to non-payment of bills, late payments, or minimum payments. If someone has a poor credit score and needs money for an emergency, the only option would be to apply for a bad credit personal loan. These days there are a number of options available to anyone who faces the problem of bad credit.

What is a FICO Credit Score?

Anyone who has a credit card or has taken out a loan for any reason has a credit score or commonly known as FICO score. The credit score is generated by three credit agencies: Experian, TransAmerican, and Equifax. The credit score is a measure that assists banks, credit card companies, loan companies, and some supplementary financial institutions to determine one's credit history.

Usually, when you have a high credit score the interest rates are lower and you have a better chance of obtaining credit. Conversely, if you have a low credit score, especially in this economy, you may find it difficult not only to obtain credit but a student loan, car loan, or mortgage.

How Can I Improve my Credit Rating?

With the current credit crunch, you may have over-utilized your credit cards which can ultimately have a negative effect on your credit rating. In order to improve your credit rating and avoid the stigma of having bad credit, here are 5 tips.

1. While credit reports can be obtained for free on an annual basis, you do have to pay a fee to view your credit scores. Therefore, go to which is the only site available for free credit reports. After you have printed out your credit reports, check to determine if there is any suspicious activity or anything on the report you do not recognize or wish to dispute.

2. In order to obtain your FICO score, you can check out: Here you will receive the scores from all three credit agencies (Experian, TransAmerican, and Equifax).

3. Pay down your credit card debt. High interest rate credit cards should be paid off first. Add additional money to the minimum payment to facilitate the reduction of the debt. Pay credit card bills on time and not just the minimum due.

4. During this economic crisis, you may find that using credit to pay for items you need is more than tempting. The problem is if you max out your cards, this not only has a negative effect on your overall credit report but can lower your FICO score as well. The general rule is not to charge more than 30% of your total credit limit.

5. While consolidating credit cards may save money on interest payments, it does not bode well for the credit agencies. So too, if you have two or more credit cards, it is recommended that you avoid applying for additional credit. Both these actions can reduce your FICO score.

In these difficult times, some of you may have to make a mortgage payment, pay for expensive medication, or utilize the credit card for an expense that, under normal conditions, you would pay with cash or check. Perhaps this is a one time occurrence. If this is the case, try to pay off that specific charge immediately.

Check your credit card reports and FICO scores and if you find low scores, it's time to take action now so that if you need a loan in the near future, you will be in a better financial position to obtain one.