Bad credit is a term used to describe a person's credit status, which depicts that he/she is very risky to repay the loan brought from lenders and other financial institutions such as banks.

People with bad credits are not at complete loss, as they are eligible for getting a credit card with poor credit ratings too. However, they have to pay a higher rate of interest and higher annual fees. Individuals having a poor credit rating have to follow strict norms.

Financial institutions offer different kinds of service such as credit card and different types of loans. Lack of knowledge on part of customers lead them to develop poor credit rating. Bankruptcy, court judgments and defaulters make it difficult for such people to get loans in the future.

Credit means you get a service or cash to use for your own purpose. It exists in different forms such as loans, mortgages or credit cards. You will have to agree the terms and conditions to repay the amount to the financial institution.

The first thing that is checked before a financial institution or lender gives you money is the credit rating. Credit rating is of two types: Good rating and Bad or Poor rating. An individual with a poor credit rating finds it difficult to get credit.

Credit Improvement:

It is possible to improve a bad credit rating or establish a good credit rating to increase your credit worthiness. This process is known as credit repair. In this process, people with poor credit ratings re-establish their worthiness. Many financing companies provide tips on how to improve poor ratings, and if you follow simple steps, it is easier to maintain a good credit.

If you maintain good credit, it will be easier for you to get a loan with lower rate of interest. However, with poor ratings, it is not possible to get cheaper loans with lower rate of interest.

It is important to understand credit rating and improve it if you have a bad rating. Many factors contribute to negative ratings and some factors are:

1. Defaulting accounts.
2. Delay on payments of accounts.

If people fail to pay their dues on purpose or due to some financial difficulty, they can still get a negative rating. Reporting agencies provide valuable information on credit rating to loan companies and banks about credit worthiness of their present and future clients.

In addition, reporting agencies do not make judgments about the credit worthiness of their clients. Card companies and financial institution can decide to give loans to their clients depending on the credit information they have.

How To Fix Poor Credit Rating?

You need to know your credit score and its value. Several score agencies help in improving credit rating. They update the credit scores on a monthly basis thereby giving you a chance to improve your financial ratings.

They will also give you, tips to increase your credit score in a positive direction. Get a secured card, pay your bills and make the card payment on time. Hence, start improving your credit ratings by this way.