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Research: Impact of bad credit history and ways to overcome -

Credit history is a report about individuals` credit transactions. It includes the details of credit card payments, loan borrowings, payment duration, accuracy of payments, default payments, etc. The report will then be forwarded to a credit bureau who then analyses the individuals transaction and submits the credit report accordingly. On basis of the credit report produced by the bureau, the banks and other lending institutions decide on the credit worthiness. When the individuals` credit ratings do not reach the standards, the credit worthiness will be marked as bad credit history.

Late Payments, foreclosures, settlements, liens, etc are the main reasons of negative information, which results in a bad credit history. Apart from the above, a bad credit report may arise due to various small reasons. For instance, a small loan may be declined when a bill remains unpaid for a long time. Sometime, due to the carelessness from the financial institutions and credit card service, or due to delay by an automated bill service, bill may not be received at proper time and this makes a black mark in the payment intervals and result in late payment along with overdue charges. However, improving the credit score or changing the bad credit history is not an easy task and requires much time and effort.

Credit limit, irrespective of loans or credit cards, should be limited. Frequent application for credit card or availing credit card offers, applying for loans at frequent intervals, may result in report of bad credit history.

However, by initializing several safety measures, the bad credit history can be improved and removed from the credit worthiness of an individual gradually. Following are the steps that can be adapted easily.

Since the payment history plays a big role in determination of credit score, timely or early payments before the due date, to avoid the late payment fees can be followed. And payment details can be mailed in advance once it is done. Online payment mode can be adapted to receive the payment approval or payment acknowledgement instantly.

Be cautious in availing promotional credit card offers or free top-up loans with existing loans.

Request can be sent to bankers to cancel the credit card account when a person holds several cards. Similarly, request can be sent to reduce the credit limit on the credit accounts.

When a person is rated with negative credit score, a joint loan with a friend or a family member can be availed. And when the defaulter ensures timely payment at regular intervals, it results in reduction and gradual removal of bad credit score. Insist on yearly credit report to grab any credit mismatch or errors.

Ensure to maintain sufficient balance in accounts to meet with regular payment of loan EMI. Similarly, credit card should be maintained with sufficient credit limit for meeting extra ordinary expenses like interest for credit card usage, etc.

Apart from credit cards and loans, insolvency or tax due with respect to income tax or property tax must be avoided. Because insolvency result in a bad credit history for about ten years and tax liability for seven years and sometime will stay towards bad credit forever.