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Bad credit history is often due to bad credit card management and overuse of the credit. A bad lifestyle where expenditure is not planned is often the cause of bad credit history. A bad credit history has many disadvantages. You will not be offered many rewards on credit cards even though your income justifies it. You will get a higher interest rate on your credit cards, home loan mortgages and also auto loans.
The premiums you have to pay for auto insurance are relatively higher than others with better credit history. You may also be asked to pay up front deposit for utilities such as telephone connections, internet connections, electricity etc. Most of these side effects mean that you have to face a lot of inconvenience and more importantly miss out on a lot of savings. This is why cleaning your bad credit history is so very important.
The first thing you have to do is start paying out your outstanding dues on time. If you have a high outstanding balance and a bad credit history, working out a negotiation with the credit card company a proper deal is not a bad idea especially if the high interest rate makes it impossible for you to clean out the original. You can also consider a balance transfer, only in a scenario when the debt is excessive and there is no scope of clearing it all out anytime soon. However, you should keep your credit card account open as you don't want to erase out the history and start from scratch all over again.
Credit scores go lower and lower as your credit card is maxed out or expenditure gets closer to the credit limit. One thing you can do is to keep your extravagant expenditure down. This will have two benefits. Firstly, your monthly payments will be less allowing you to pay a little bit extra on the card to improve your credit score. Secondly, your expenditure will be way less than the credit limit thus improving your credit rating. Another way of solving the problem is by requesting an upgrade and asking for a higher credit limit. That is however, a risky proposition unless you have good money management skills as it can push up your expenditure every month increasing the chances of getting an outstanding balance.
Besides, paying your monthly payments on time and keeping your expenditure low, you can also go for an auto loan if you have a bad credit history. This will allow you another opportunity of showing your consistency with monthly payments; although, it is advisable not to take it up if you cannot really afford it. Ensure that you have as less cards as possible. It is often not a good idea leaving a couple of your cards maxed out. Similarly you should try to close out all loans if possible or work out with a consultancy or credit card company towards consolidating your debt into one card if you have a bad credit history. This makes it easier for you to manage and know exactly how your payment plan is going and what is due at the end of every month.
