Having a good credit rating is important in today?s world. If you have recently applied for credit and you were denied, you may be surprised to find that you have a poor credit rating. A less than desired credit rating can occur for several different reasons. Here are some common problems that can cause your credit rating to decline, and some things you can do to protect yourself in repairing your credit situation.

A common reason for a bad credit rating is a slow payment history. That is why it is important to pay your bills on time. When you do not your creditors keep track of that information and report your late payment to the credit reporting agencies. When other companies who are considering lending you money see this late payment history they are concerned about their ability to collect their money, too. The easiest way to ensure that your payments are never late is to set up online bill pay through your bank. This way you can have your bills set up to be paid automatically each month. If you choose not to do automatic pay, then you will have to set up a manual system, maybe setting aside a weekly time for bill paying, to ensure all your bills are paid in a timely manner.

Another reason for a poor credit score is carrying too much debt. Sometimes the problem is not that you pay late, but simply that you owe too much money as compared to the amount you make. This is called a high debt-to-income ratio, and it can keep lenders from loaning you money because they question your financial ability to repay it. When reviewing your credit report lenders look not only at the amount you owe, but credit card accounts that you have open. Even if there is not a balance on these cards, it is money that you could borrow, further reducing your ability to pay. If you have too much credit, it is wise to pick a card or two and work hard to get them paid off. You may decide to close some credit cards to reduce your available credit. Just be careful not to close an account that you have had for a long time because having a long history of credit is to your advantage.

Collection accounts are another cause of low credit scores. If you have an account that has been sent to a collection agency it is critical that you take care of the situation immediately. If you dispute the debt then you will need to send a letter to the creditor, and have your credit report note that the account is in dispute. Once you have paid a collection account then be sure to follow up and ensure that the company reports to the credit bureau that you have paid in full. The fact that you had a collection will remain on your credit bureau report for seven years, but a paid collection looks much better than an unpaid one.

You can see why it is important to keep on top of what is on your credit report, so that any mistakes can be addressed immediately. Your ability to borrow money depends on your credit report.

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