Simple ways to avoid a sub-prime credit history

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Credit Card Applications » Research » Guides » Building Credit History » Simple ways to avoid a sub-prime credit history

Simple ways to avoid a sub-prime credit history


Updated: December 26, 2012

The content is accurate at the time of publication and is subject to change.

Bad credit history is also known as non-status history. It is a negative credit rating given to an account holder on the basis of his credit scoring. It is not desirable for those who need money or capital on loan to have a negative mark on their credit score. Typically a lender goes through the account information of a person in detail to decide whether the applied loan should be approved or not. This includes credit limits, balances, payment history etc and that`s when having a poor credit history could be very harmful.

Credit scoring was brought into being to make it easier for lenders to ascertain the terms upon which a loan or credit card application may be approved. It also allowed more consumers to get such benefits. It involves marks that are normally dependent on statistical analysis of the consumer`s credit history when pitted against other debtors.

A lender investigates very thoroughly whether an account holder should be credited finances or not. Consumers having a history of bad credit invite trouble in this area especially if they have been consistent in maintaining a poor score. The consumer`s earlier capability in paying bills on time, the amount of outstanding credit against the money owed and the duration of the credit are all contributing factors in attaining an impaired credit history.

Bad credit history is known to be one of the most important reasons why a loan is declined. Keeping sight on the amount of money borrowed by an account holder and also his/her repayment history; lenders take the past record of a consumer very seriously. Reportedly, it is also a good pointer in helping determine the intent of the credit card holder, especially whether or not they are in a financially difficult situation. Being able to judge the motive of a potential borrower, it also enables a bank to make their lending decision in an efficient manner.

For future benefits from a bank or lender, it is best to stay as far from having a bad credit history as possible. Some steps that can be adopted to make your credit score better are paying your bills on time and avoiding late payments, keeping away from bankruptcy and lowering not just the number of credit cards, but also reducing your credit limit amount on your cards. Consumers must also get their credit report on a yearly basis to spot errors if any on the lender`s part. To re-establish credit, consumers can further request a family member to sign jointly on a loan or credit card having a small limit.

All in all, banks and lenders take into account a number of factors before a loan is authorized and bad credit history stands out as the most important one among all reasons cited for denial. Above everything, a lender must be able to gauge that there is minimum risk involved in crediting an account holder with the desired amount. Maintaining a good repayment history and also stating very clearly the intentions involved in gaining credit goes a long way in building a good reputation with the bank.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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