Bad Credit is Not the End of the World

By Kelly Richardson Columnist

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You had a few missed payments on your first credit card in college. Or, with the never ending expenses for your child's school, you haven't been able to make a few minimum payments. You're not a bad person; you've just had bad luck. And now you have bad credit to boot.

Facing sub prime credit is not a pleasant experience. It can affect almost every financial transaction in your life. Getting a cell phone, applying for financial aid, and certainly getting a favorable mortgage for a new home are all difficult tasks to accomplish with bad credit. According to, the average household credit card debt has increased 167% between 1990 and 2004. And credit cards aren't the only enemies that can burden your credit rating.

What is Sub Prime Credit?

  • » Debt to Income Ratio. One indicator of bad, or sub prime, credit is your debt to income ratio. A ratio of 30% to 50% of debt to income can lead to bad credit.
  • » Payment History. Missing just a few of the required monthly payments can cause negative marks on your credit report.
  • » Number of Debtors. If you owe money to several debtors, such as credit companies, banks, or utility organizations, this can also decrease your likelihood of getting a favorable mortgage.
The good news is, it's never too late to repair your bad credit. Before you apply for a mortgage, or even consider purchasing a new home, follow these sensible steps for credit repair.

How to Overcome Sub Prime Credit

  • » Know the Score. You are entitled to a free report of your credit history from one of the three major credit collectors.
  • » Pay Off Debt. Sounds simple, but it works. Get control of your spending, create a budget, and follow it to the letter.
  • » Write Letters. Communicate with the credit organizations and express your desire to improve your rating. They will help you get there.
Bad credit isn't a badge of dishonor. It is typical of many consumers, and it can be overcome. All it takes is a little discipline and the willingness to do whatever it takes to prevail.

Credit Cards
US Department of Housing and Urban Development

About the Author
Kelly Richardson covers the real estate scene in major cities across the country. His articles appear in educational journals, periodicals, and e-zines.

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