Any type of bad credit on your credit report is considered adverse credit. The length of time these items remain on your credit file can vary. Whenever you have bad credit it affects the cost that you pay for other credit products and services. Sometimes adverse credit information is reported on your file in error. If this happens you should contact the credit reporting agency and dispute the information in writing.
Credit Score
If you are 30, 60 or 90 days past due on a credit account, this is considered adverse credit. This delinquency can lower your FICO score or credit score. A FICO score is what lenders use to predict the likelihood that you will default on a loan payment. The score can range from 300 to 850, and the higher your score the better. Lenders will use your score as a method for determining the interest rate they will charge for credit cards, auto loans, mortgage loans and home equity loans. Some lenders will not approve you for a mortgage if you have a score less than 620.
Types
Other forms of adverse credit include judgments, liens, foreclosures, repossessions, collection accounts and bankruptcies. Adverse credit can remain on your credit file for seven years with the exception of bankruptcies, which can remain for 10 years. As time goes on, adverse credit will have less of a negative impact on your credit file even though the seven-year time frame has not passed.
Re-establish
After you have experienced adverse credit, you will need to re-establish your credit. Some credit cards will charge you high rates of interest along with fees if you are approved. It is not uncommon to see annual fees, late fees, over-the-limit fees, application fees, maintenance fees, processing fees, and an activation fee offered by credit card companies catering to individuals with adverse credit.
Secured Card
When you have adverse credit you may have to apply for a secured credit card. This type of card has a high rate of interest and an annual fee. You must have a bank account, with a deposit of $300 to $500, which serves as security for the credit card. Your credit limit is the amount of the deposit. Once you have paid on your secured credit card, for one year, you may be able to receive a standard credit card with favorable terms.
Improvements
The best way to counter adverse credit is by making your payments on time with any new established credit. You need to pay consistently on time. It takes time for you to correct adverse credit. After seven years the vast majority of it will drop from your credit file.
Universal Default
If you are ever late with a credit card payment, your other credit cards could increase your interest, lower your limit or close your account altogether even though you have not been late with them. Credit card companies will periodically review your credit file to see if your credit profile has changed. They look to see if you have late payments, acquired too much debt or use too much of your available credit. This is called the universal default clause.
Considerations
When you have adverse credit it can cause a number of problems. You could be rejected for loans and other credit products. A lot of companies will review your credit report before they hire you, and adverse credit could prevent you from getting a job. Insurance companies will charge higher premiums when you have bad credit. Without a credit card you may not be able to rent a car or a hotel.
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