November 30, 2021

Repairing Your Credit: A Bad Credit Overview

Financial industry analysts estimate that as many as 25% of all Americans have poor to bad credit.* But do you know what “bad credit” actually means?

• What is meant by “bad credit”?

• Is your credit bad?

• What can you do to fix poor credit?

Defining Bad Credit

If you have a car loan, student loans, a mortgage, a boat or motorcycle loan, or a credit card of any type, then you make some of your purchases on credit. Simply put:

• On-time loan and credit card payments, including pre-payment = good credit.

• Late payments, default, home foreclosures and short sales, long-term unemployment, and bankruptcy = bad credit.

Financially speaking, bad credit is defined as a low credit score (599 or less) and a poor credit rating, while 700 or higher is usually considered a good score and equal to good credit. These numerical indicators give banks and lenders a standardized measure of consumers’ debt risk.

How to Check Your Credit

Good or bad credit aside, each of your credit accounts and associated transactions are all documented by the three major credit reporting bureaus: TransUnion, Experian, and Equifax. This record of your credit is aptly called your credit report or your credit record.

• Check your credit reports: According to the Fair Credit Reporting Act of 2001, you have a legal right to request one free credit report from each of the above three bureaus annually, by visiting Beware other websites that promise you “free” credit reports then charge you a fee.

• Check your credit score: Before you pay money for your credit score, find out if your bank offers any access to your score if even a one-time look. What’s “good” or “bad” is not written in stone, but most sources suggest that anything below 599 is a poor score and anything over 700 is good.

Fixing Your Bad Credit

You have your credit reports and your credit score, now what?

• Admit that you have bad credit and a poor credit record

• Review each of your credit reports. Make sure all account information is correct, including your personal information as well as account balances and payment histories. Contact the agencies to make any corrections.

• Create a personal or family budget

• Write down everything you buy

• Make all your credit payments—at least the minimum required–on time or before

• Cut up credit cards and either pay cash for purchases or don’t buy

• Talk to a financial advisor—your bank may actually provide one that offers free consultations.

Making on-time payments and steadily making progress toward paying off your credit accounts will surely help raise your credit score, moving you from “bad credit” to good.

For additional details on getting your free credit reports, read the Federal Trade Commission’s (FTC) guide, “Your Access to Free Credit Reports.” ( )

*Marketplace, American Public Radio,

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