Finance >> Credit Cards >> Bad Credit

Bad Credit


There are only two reasons why you could be declined credit. Either the lender has no money to lend or you have a poor Credit Rating. The decision to lend depends on the ratings supplied by the credit rating agencies. There are two leading credit referencing agencies – Experian and Equifax.

They decide your credit rating by checking your credit history which includes eyeing how you have been repaying your debts and dues. Whether you are regular in paying your credit card dues, your loan installments and are you utilizing your full granted credit.

Your Credit Ratings are marked in red if you are defaulting on your payments. If you are trying to obtain a good credit rating every single transaction counts be it buying a refrigerator to obtaining a good credit limit in your credit card.

Credit History

Credit history highlights your past dealings. It throws light on how you have dealt with your financial obligations and commitments. These include your past borrowings and whether you have been able to repay them in a timely manner. Therefore any late payments or untimely payments are highlighted in your credit history.

Maintaining a good Credit History is important as credit reference agencies apply all this information and rank you to give you an individual credit score. Thus your Credit score becomes an important reference number for lenders to access whether you should be granted credit and how much should be granted.

Thus a low credit score implies low credit rating which makes it difficult for you to find a lender to grant loan at reasonable terms.

With a poor credit history the rates of interest at which loans are granted also increase. Therefore it is important to maintain a good credit history to be in the good books of credit reference agencies and lenders.

Bad Credit History

It is very easy to obtain a bad credit history. It really is!!
  • Every time you neglect a payment due you degrade your credit history.
  • This includes making late payments
  • Debt defaults also affect your credit rating
  • If you are not able to carry out a financial contract as per its terms then you earn a poor credit rating.

Maintaining Good Credit History

Several steps are important to maintain a good credit history. Few of them are:
  • Timely payment of bills overdue is crucial to maintain a good credit rating
  • You should not be borrowing more that your capacity to repay. The lenders check your ability to pay your installments from your after tax incomes.
  • A stable life such as how long have you been residing at your current home or job. Will you continue to maintain your capacity to repay your loan?
  • Have you used up all your available credit avenues? How much is your credit limit on your Credit Card and what percentage of it have you been using?
  • How long have you been granted this credit limit?