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A bad credit history can hamper ones ability to function normally in daily life. And it can happen to anybody given the unpredictability of today`s financial institutions on which we have put our faith and belief along with our hard earned money. But not all is lost if you end up with a bad credit history. You can always work harder to get yourself out of the situation that you find yourself in.

The first thing to do is to find out what your credit record says. You might be diligent with your finances and plan your every move. But you still need to check your credit record every year. Apply for a copy of your credit record with one of the credit bureaus. They will provide it to your free of charge. You are eligible for one credit report per year from each one of the credit bureaus. But before we go further, let us first understand what is meant by a credit record.

A credit record is a record of all your financial transactions over the past eight years. It will list all the outstanding loans, your debts and credits and also your open credit accounts. It will also provide a credit score. A credit score is a score that is given to you by the credit bureaus. This score is based on a number of factors which are weighted according to importance. But basically it depends on the debt to credit ratio, the lower the debt to credit ratio, the better for your score.

The first thing to do to avoid a bad credit history is to reduce your outstanding debt. Always ensure that you do not borrow more than thirty percent of the credit limit on your credit card. If you do so, you will end up being branded as a compulsive borrower. Also make sure that you pay up all your outstanding debts by the end of the month. If not, you will end up paying interest on it and also it will look bad on your credit report.

All in all you need to be more financially wise. You will first have to start spending within your means. Always save some amount of money for a rainy day no matter how much you earn. This will go a long way in securing your future financially. And try not to get carried away by numerous reward that are offered by credit card companies.