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Articles Finance Credit >> View Article

By: Danette Mckay
Having a bad credit is not rare today. With the economy taking a dive more and more consumers find themselves defaulting on payments not to mention consumers that default on their mortgage and foreclose their homes. Bad credit can limit your ability to get loans but you should not give up.

Bad credit is the casual description of a low credit score also known as your FICO score. Not all bad credit is the same and although you and your friend for example could both have the same low FICO score and both be considered to have bad credit if the reason for the bad credit are different your ability to fix your bad credit and to get loans is also different.

Bad credit can be the result of many problems that one had in the past. Most likely bad credit is a result of defaulting on some major debt payments. If you once forgot to pay your electricity bill that would not be reported to the credit bureaus and it will not be reflected in your credit. If you keep forgetting to pay your electricity many times your electricity bill might eventually be sent to a collection agency which will report it to the credit bureaus which will end up hitting your credit score. But such failure to pay bills is not uncommon and although it will influence your score it will not be likely to prevent you from getting future debt. When a lender evaluates your credit risk and if to provide you with a loan they look at more than just your credit score. They actually look deeper into your credit history report to see what went wrong and why your score is what it is.

There are some major events in your history that can dramatically influence your credit score and your ability to get credit in the future. Specific events tend to scare specific lenders more than others. For example if you failed to pay your mortgage and had to foreclose you are not likely to be able to obtain another loan for a new home for quite some time. But on the other hand there is a good chance that you will still be able to obtain a loan for other needs for example a car loan since the lender risk is lower as they have your car as a collateral and since they might understand the home foreclosure could have been a result of the market more than your credit integrity.

Some events in your credit history are so dramatic that they are likely to prevent you from getting any loan for a long time in most cases up to seven years or more. The most known event is filing for bankruptcy. Filing for personal bankruptcy is so dramatic that it will scare every lender until such bankruptcy is purged from your credit history usually after seven or more years. The reason is that if a person had to take such a dramatic measure it usually means that they are at risk of having to do that again as it means they failed to manage their finance in a very fundamental way.
This article and more are from Danette Mckay who is an expert in his field. no lengthy provides more in depth information.
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