Bad credit is a poor credit rating. People with a bad credit rating have a history of late payments, skipping payments, over borrowing on credit cards or declaring bankruptcy. Poor financial management leads to bad credit. Spending habits, forgetfulness and lack of organization result in a bad credit rating. Then credit reference agencies give you a negative rating whenever you apply for a home loan or a mortgage. Not to worry as you can still get bad credit loans.

What is credit scoring?

This is a statistical method to analyze the applicant's characteristics. With the help of credit scoring the lender decides on the applicators qualification for credit. Credit rating or credit scores are provided to lenders by credit bureaus. The Federal Trade Commission site on consumer issues gives details of credit scoring. Applicant's bill-paying history, the number of accounts, types of accounts, age of accounts and amount of outstanding debt determine the scoring. Points are awarded for each factor

• Whether you are likely to repay the debt

• Whether you are likely to make payments on time (payment of credit card bills, utility bills, student loans etc. are checked.)

• Ration of the income to debt is another important factor. In worst cases it is 60:40.

• The length of time one has had credit is also important as it shows how the applicant has handled credit over a longer period of time.

Make sure your report is accurate. Fix Bad Credit Report if it is inaccurate. You could go online to find the various credit reporting agencies that could provide you, your credit report for free.

Obtaining Credit

A check on the credit of the loan applicant is done by potential lenders before granting mortgages, personal loans, refinancing or other loans. The three agencies that are primarily used are Trans Union, Equifax, and Experian. The lender does not rely only on credit scores to give you the loan but checks three factors Capacity, capital and Character.

Capacity indicates your ability to make payments on time. A steady job, your salary and other payment determine this ability. If you do not have a steady job and a good salary you cannot pay back easily. Also if you are making payments for other loans you may not be able to attain another if you do not have the capacity to pay back.

Capital is the total assets you have in stocks, banks and immovable property. A sale of any of these assets could help you repay the loan in case you are unable to work or your savings dwindles. Applicants with more capital get bigger amounts in loans or mortgages.

Character is determined by the promises you have kept. This is an important factor as all lenders look to receiving their payments at the right time.

An important consideration is the applicants

• Income to debt ratio also determines whether you get the loan. The worst case this can be is 60:40.

• Credit history of bill-payments

• Has the applicant filed for personal bankruptcy at any point of time?

• Credit rating score should be in the mean values, neither too high nor too low.

• Incase of earlier debt they type of debt you have is considered (installment or revolving debt).Revolving debt is applicable by credit card companies.

Many people like to erase bad credit; you could go to credit repair services that are non-profit. Get their help to organize your payments and finance. You could avail a debt consolidation loan and get even on bad credit scores.