Let us first understand the term bad credit history. When you file an application for a credit card with a bank, details filled in will help banks decide whether you will receive credit or not. If bank records indicate that timely payment of debts was not done, you are likely to be turned down for the next loan. Therefore banks use records of timely payment of debt to determine your credit worthiness.
Defaulting on loan re-payments due to unemployment and financial loss is unavoidable. You are heading towards troubled waters if you are simply swiping away your credit card on a shopping spree that exceeds your weekly paycheck. Defaulting on credit card debts will earn you a tag of bad credit history. Furthermore, you will end up paying $6000 on an outstanding balance of $20,000if the annual average percentage rate (APR) is 20%.
However, some credit defaulters continue to get loans from banks to fulfill credit unworthy needs. It appears lenders have identified a market within the segment of credit defaulters, who will continue to borrow and spend without a second thought. Numerous websites provide lists of banks and credit unions that will provide a loan to habitual defaulters. To minimize their own financial risk (Banks don’t want to go bankrupt because of a shopaholic), bad loans are provided at higher interest rates.
In your best interest, clear your bad credit history as early as possible to avoid bankruptcy. To get rid of bad credit history takes the following measures:
To pay your debt sooner, transfer the outstanding balance to other cards with low interest rates with zero percent balance transfer.
Improve your credit score by paying all your bills on time regularly. In turn, your three digit credit score will improve and you are more likely to get a home loan at a more affordable rate of interest. Start mailing your credit payments on time without fail.
Close out on unwanted credit card accounts. Having one credit card will keep you grounded and in control of your expenses. Start looking at your wallet before purchasing an unnecessary dress or gadget and save before you head towards the shopping mall to buy it.
Order your credit reports from the credit bureaus. List maxed out accounts and bring down their credit limit. Highlight payments incorrectly reported late. You can dispute any incorrect discrepancies in the report, by sending a letter, to bureau containing the highlighted discrepancies.