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Making the Most of Bad Credit

Establishing credit takes time and commitment to solid consumer behavior.  Credit cards, car loans, mortgages, student loans and other credit are extended by lenders based on assessments of each borrower's creditworthiness.

Young people are at the greatest disadvantage securing credit, simply because they have limited numbers of experiences in the lending market.  Still, it pays to begin navigating credit relationships at an early age, so your history of timely payments is well-established when you need it as a reference.

Good Credit Risks

Lending is an industry of calculated risk.  Loans are made based on each lender's belief that they will be paid back timely, according to terms and conditions agreed on by all involved parties.  While it might seem easy to say you'll make good on a loan, and your intentions are true to do it, lenders need further assurances.

Since past behavior predicts future actions, the best way for lenders to check you out is to look at what you have done previously.  Bills you have paid-off successfully work in your favor, illustrating the type of follow-through creditors need.  Young people have short credit histories, but mobile phone plans and car loans serve as good indicators about creditworthiness.

Utilities are additional ongoing expenses, providing further credit references for borrowers.  Gas, electric and water accounts established in your name are just like credit card accounts, extending energy in advance, based on your pledge to pay for it later.  As you build credit, don't overlook utilities – your record paying on-time might make-or-break a future loan application.

Credit card companies extend revolving borrowing opportunities, which are subject to interest-free grace periods.  Each billing cycle, purchases are reviewed and minimum payments required.  Staying on-pace with credit card payments is one of the fastest ways to gain favor with future lenders.  Your ability to manage revolving amounts, making good on repayment each period, is exactly what creditors like to see on your credit report.

Credit Failures Work Against You

On the other side of credit relationships are those which don't work out.  Just as meeting expectations bolsters your credit status, failure to stay on top of required payments undermines it.

Late payments are credit-killers, because they demonstrate a willingness to borrow beyond your means.  Taking on too much debt, prohibiting you from making required monthly payments, is risky behavior in the eyes of lenders.  Even if you catch-up quickly, late-payment entries are hard to overlook on credit reports. Having insufficient funds in the bank to cover an issued personal check is another black mark to avoid on your record.  Bounced checks are tracked by reporting agencies the same way missed payments are, undermining your access to future credit.

When repayment problems loom on the horizon, proactive measures are required to save your good credit rating.  Work with your lender to establish affordable payments, before missing a required installment.  It is harder to go back once you've failed to pay, than it is to make arrangements ahead of time.  Bad credit loan calculator breaks down your monthly payments, separating principal balances from interest due.