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 obtain bad credit ratings for many reasons, and in half of the cases, it's not their fault. For example, you could get a bad credit score simply because someone in the credit bureau made an error in entering the data. Or someone with the same name as yours defaulted on a loan and then registered that default under your name. Or else you moved to a new house and last month's credit card bill got lost during the shuffle and you forgot to pay it. An expensive mistake, for sure, but an honest one. Failing to make minimum payments on a credit card consistently is definitely bad news, but forgetting once or twice to make a payment does not merit condemnation.

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.

Why Does Bad Credit Exist? In many cases, of course, the reasons you have bad credit are completely under your control. Among them are compulsive shopping, overspending, living beyond your means, et cetera. However, in many cases, you cannot control the reasons bad credit have happened to you, such as when personnel at the credit bureaus incorrectly enter your personal information. If you correct errors made in these types of situations, your credit rating will be restored quite easily and quickly.

There are other reasons why individuals have bad credit: being laid off the job - unfortunately, we live in an era of downsizing. Companies are slashing their budgets and trimming down staff numbers. When you are laid off unexpectedly, this can trigger off a string of events, some of which may affect your credit standing;

A second reason this type of difficulty may occur is if you are facing foreclosure on your home. Even if you have a steady job, you can still face the situation. Many people bought overpriced homes in the previously inflated real estate market, and did so through lenders who were willing to cut corners to help them buy homes they really could not afford. Many of these homes also came with such substandard elements as adjustable-rate mortgages, which is where the rate starts out at a reasonable level that the homeowner can easily afford. However, then rates can suddenly spike with no warning, wherein the payment increases by several hundred to even a thousand or more dollars a month. In these cases, often foreclosure was the only way out of such a situation, which in turn affects the homeowner's situation.

Yet another situation you might find yourself facing is divorce, which can also adversely affect your credit rating. In fact, many credit counselors say that this is a very common reason to suddenly have a bad credit rating when it's previously been good. In divorces, of course, assets must be divided between former spouses. In addition, there are often alimony and/or child support payments to make as well. Therefore, income that previously was entirely adequate suddenly isn't enough.

failing health can ruin a lot of credit ratings - people who fall ill unexpectedly or are suddenly suffering from a disability will not be able to continue working. We see here a domino effect: loss of health = loss of job = loss of earning potential = limited cash

Finally, the one situation that many Americans find themselves in that can be avoided is simply overstretching their own spending means by "borrowing" money from credit cards for frivolous or over-consumptive shopping. In today's "plastic" society, many people have 1, 2, 3, 4 or more credit cards and have each maxed to the limit, so that even minimum payments are difficult to come by on their budgets, not to mention full payment of purchases made every month so they are truly living within their means.

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.

If you want to repair your bad credit and restore and then maintain your healthy credit rating, you should:

Keep careful track of both expenses and income. Once you do this over the course of a month, you will doubtless find many ways where you can "trim the fat." For example, if you eat out every day at work, you can save yourself several dollars a day, or as much as $50-$60 a week, if you pack your lunch instead of eating out, and reserve lunch out as an occasional treat instead of an everyday occurrence. To best create your budget, first start by jotting down all of your "must-have" expenses. These include your mortgage or rent payments, any car payments, student loan payments, food and basic utility and fuel expenses, insurance, etc. *All* of these expenses should comprise no more than about 60-70% of your total take-home income, with your mortgage and home expenses comprising no more than 30 to 35%, or about half of your "must-have" expenses. The remaining 30% or so should be divided such that you're saving 10 to 15% in retirement and investments of your income every month if you're under 35 years of age, or 20% if you are over 35.

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 debt, pay off the highest interest rate cards first. To do this, make the minimum payments on all of your other cards, then take the highest interest rate card and put all of your available "debt" cash toward that payment. Do this until you have paid off your highest interest rate card, then go on to the next. Make minimum payments on all of the lower interest rate cards, then take your highest interest rate card that still has a balance on it, and pay as much toward that as you can. You'll soon see that you can be debt free very quickly, as long as you practice discipline and diligence.

Finally, make sure you pay your bills on time. Making mortgage, utility, tax and other bill payments on time shows that you are diligent and prudent in your spending practices and this will reflect positively in your credit report. So if you've got bad credit, don't panic. Simply taking some care to pay bills on time and be prudent in your spending, as well as keeping a careful watch on your credit reports from all three bureaus, will bring you back to good standing in very little time.

About the Author:

Steven J. Talrechi has authored articles about credit reporting and fair credit practices for over 10 years. His specialty is helping others get a second chance checking account and second chance bank account when they have been turned down by banks. Product reviews.

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