By: Kelly Richardson
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 CreditCards.com, 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.
Sources
Credit Cards
US Department of Housing and Urban Development
