If you're in a bit of a financial struggle lately, don't worry. Many people are. And as with anyone, it's likely that this financial struggle has probably affected your credit rating. If this is true, don't worry.

People are slapped with bad credit ratings for several reasons. In many cases, it's through no fault of their own. As an example, you might get a bad credit score just because someone at the credit bureau itself mistakenly entered inaccurate data. It may also be that you have a very common name, for example, and someone sharing your name defaulted on a loan, went into bankruptcy, or had some other financial hardship situation, and that person's information got entered in your credit report. Other situations include a recent move, where a credit card bill got lost in the mail and you forgot to pay it. Although this can be expensive, it's an honest mistake. Certainly, it should not so adversely affect your credit report.

If you have a bad credit rating, this does not mean that your reputation or access to financial services is damaged forever. Indeed, you can fix this situation almost immediately, but you have to do some work to do that. However, if you are consistently behind on financial payments, or have other financial struggles that are "permanent," this is not a quick fix situation and credit counseling may be the best bet for you.

In fact, bad credit is so common that the US Trustee Program of the Department Of Justice has approved use of credit counseling agencies so that these agencies can assist people who have credit difficulties. Their web site is at: www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm. There, you can find a list of credit counseling agencies available in your area, along with contact information, so that you can find the proper assistance.

Reasons for Bad Credit: In some cases, of course, you can control the reasons you have bad credit, such as over-shopping and using credit cards carelessly. However, many times, the reasons you get into financial difficulty are beyond your control. For example, as previously mentioned, someone at the credit bureau may incorrectly enter information. Therefore, correcting the error made rectifies these types of bad credit situations.

Other reasons you might have bad credit is if you lose your job or are laid off. Unforeseen, this is an increasingly common situation in today's job environment. In turn, this will affect how and when you can pay your bills, so even if you've been a very responsible consumer previously, if you suddenly have substantially reduced or no income, you will have great trouble paying your bills and therefore will look irresponsible, even though the actual difficulty is through no fault of your own.

A second reason this may occur for you is if you are suddenly facing foreclosure for your home. Even people with steady jobs face this situation, since many bought overpriced homes in the previously inflated market through lenders who were willing to cut corners to help them buy homes they really couldn't afford. Many of these homes also had such risky elements as adjustable-rate mortgages, where the rate starts out at a very reasonable level and which the homeowner can pay easily. Then, however, rates can suddenly spike and this can increase the mortgage payment by hundreds or even a thousand or more dollars a month. Facing these types of situations, even homeowners who have previously been responsible about making mortgage payments are suddenly faced with a mortgage they cannot pay. In this case, foreclosure is often the only way the situation can rectify itself.

divorce is another popular reason for credit problems - credit counselors say that this is one of the more common reasons for earning a bad credit rating. When assets have to be divided up between husband and wife and there are alimony and child support payments looming in the horizon, money becomes scarce;

Still another reason for bad credit is if your health is failing or if you are suddenly facing substantial medical expenses that cannot be avoided and yet that you cannot afford. With substandard or no medical insurance becoming an increasingly common situation, many individuals find themselves facing serious illnesses that they must take care of, yet cannot afford.

Finally, over-stretching one's credit limits can do the most damage- it amazes us how people's wallets are overflowing with plastic. Instead of keeping one or two credit cards, they have 10! In addition to the usual cards like MasterCard, Visa, Diner's and American Express, they also have credit cards from department stores, gas stations, and other retailers. When one card is maxed out, they simply use the next one.

Avoiding Bad Credit Here's the golden rule on bad credit: before making any major purchases, request for a free copy of your credit report from Equifax or Trans Union. When you read something that you believe is false or inaccurate in the report, write a letter immediately and ask for proof or ask that the report be corrected immediately. Whatever you say to the credit bureau should be executed in writing. This is the only way you can show proof that you acted in good faith. Don't wait for weeks before questioning your credit report.

To further avoid bad credit and maintain healthy credit rating, you should:

Take stock of your financial situation - jot down all sources of your income and how you're going to spend that income. Create a budget and stick to it. Discipline in spending works in your favor - banks are more predisposed to lending money to individuals who exhibit prudence;

Really understand what you NEED to spend money on. We are a nation of excess. Frivolous expenses must be avoided while trying to repair your credit rating.

When you pay off credit card debt, you want to pay the highest interest rate credit card off first. In order to do this, you need to make the minimum payments on all of your other cards, and then apply the rest of your money to the highest interest rate credit card you have. Do this each month until the highest rate credit card is paid off, and then move on down to the next highest interest rate credit card. Make minimum payments on all of your other cards, and then take the balance of your allotment and put it all on the highest interest rate credit card you have. Continue doing this until all of your credit cards are paid off. This should happen relatively quickly, as long as you practice discipline and diligence.

Finally, the last way to make sure your credit rating will be restored is to pay your bills on time — all of them. Mortgage, utility, tax payments, and other bill payments made on time show creditors that you are prudent and diligent in your spending practices, which will reflect positively on your report. So if you've found yourself with bad credit, don't worry. If you take some time to pay bills on time, pay off credit card debt as described above, and remain prudent in your spending, you'll be back to good standing in very little time.

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