Bad credit borrowers must be proactive

Time heals all wounds, except when it comes to credit reports. At least, time will not heal negative information on a credit report quickly enough for it to be of any use to someone looking to get a car loan or mortgage.

FICO recently reported that approximately 43.4 percent of Americans, or about 25.5 percent of the country, have bad credit, which is a score below 599. Many consumers with bad credit might look at their credit report and determine that the only way to improve their score is to wait for the negative information to expire.

That’s not a good way to handle the situation, reports Forbes. The best way to improve one’s credit score is actually to use credit responsibly. For many borrowers with bad credit, this thinking leads to a cycle – they have bad credit so they can’t get approved for a line of credit. Yet borrowers with less-than-stellar scores have more options than ever, whether it’s a secured credit card or pre-approved car loan.

The interest rates on these cards will be higher to account for the poor credit ratings, but if a borrower makes the monthly payments on time, they won’t have to worry about paying extra. And as they continue to demonstrate responsible financial behavior, they’ll see their credit rating improve.

It’s true that negative information will eventually be removed from a credit report, but more serious offenses like charge-offs have a shelf life of more than seven years. Buyers can have a much more immediate impact by using credit wisely now.