Bad credit also known as subprime credit in the mortgage industry, will affect your pocket book in more ways than making it more difficult for you to get a home loan. Not only will you have a higher interest rate on your mortgage but it will also translate into higher interest rates on car loans, store credit cards and the well-known bank issued credit cards. In addition, poor good credit can even prevent you from getting some jobs. As a result, it is clearly important to improve your credit if it's fallen into such a condition.



You're probably thinking, sounds good, "but how do I do it?" Remember, developing bad credit didn't happen overnight and you can't improve overnight either. However, it's not as difficult as you might think if you follow a few simple rules.

First and foremost, you must stop spending more than you can afford. Surely a common sense principal but not followed by millions of Americans.

Next, stop making your payments late. Late payments show up on your credit report as 30, 60, 90 and 120 plus days late and each time this happens it goes into the formula for calculating your credit score and results in a lower score.

If your debt has gotten out of control you need to seek credit counseling or even bankruptcy. Neither is a bed or roses but if you're to that point your need to bite the bullet, humble yourself and take the plunge. If you can't make the payments and the interest rates on your credit cards has already been raised to 20 or 25 percent these may be your only options.

Setup a budget or your monthly expenses and keep track of everything. If you don't know how much it costs to live each month compared to your income you'll never get your financial house in order. Once this is done take a look at where you can cut back. Hey, nobody said this would be easy but once you make a few changes, exercise a bit of financial restraint you'll be amazed at how much additional cash you can free up each month to pay down your bills.

Another key ingredient to remember is that regardless of how bad your credit has gotten it doesn't take the 5, 7 or even 10 years like you always hear about to fix it. Follow this simple advice and within 2 years you can have your credit back to good or even very good. Of course, a prerequisite is that you get your current bills under control.

Ok, all you need is two credit cards. Use one to buy groceries, the other to buy gas and then pay them off at the end of each month. Simply switch between the two for "emergency" purchases but always try to pay them off at the end of each month or keep a very low balance. Use cash to buy everything else. You only need two credit cards or what the credit industry calls "trade lines" paid on time and preferably paid in full each month to really raise your credit score. So follow the two credit card rule above and even if you just had a bankruptcy or you've gone through credit counseling, within a few short years you can have your credit score back to where it no longer hurts.

Last but not least, get a copy of your credit report from the 3 major credit reporting agencies: Experian, TransUnion and Equifax and then take a close look at them to make sure they are correct. Many people who have gone through credit problems have credit reports that haven't been updated correctly to reflect their current status with creditors, even after they've paid off bills or made special arrangements with their creditors. The bad information can be on their reports for years hurting their credit score, so make sure you get a copy of credit report after you've done your part in putting your financial house in order. You can simply type in the name of the above credit reporting companies in any of the major search engines to find their home pages.

Better yet, go down to your local bank or mortgage company and apply for a loan (even if you're not interested at this time in getting a loan) and ask them for a copy or your credit report (after your initial meeting and they've called you back). However, make sure it's a tri-merge credit report, which includes information from all 3 credit reporting agencies or your credit report won't be accurate.