The consumer builds up a credit rating by workout financial responsibility i.e. paying bills on time, other factors such as your income also have an effect.
Generally, people are apathetic towards credit ratings at times when a credit rating can determine their financial affairs the most. For many this is because they presume that theirs is so bad there's no level in finding out, for others; it is simply lack of awareness.
Checking out can be beneficial for a number of reasons; if you find that your credit rating is good or mild, it helps you to make an informed decision as to where to apply for credit instead than risk being tricked into loans for people with bad credit or bad credit cards, if you already have a credit card, your effective credit can help you transfer your balance to a lower interest rate credit card.
If you determine that you have a bad credit rating, it's not a position to dwell on either, it is a situation you can and should change:
On finding out that you have a bad credit rating, the first step you should take is to vigorously check the report for any mistakes; sometimes creditors make mistakes when reporting to credit reference agencies (e.g.; an apparent late payment that you know you made on time). If there are activities on there that you disagree with, call the credit reference agency responsible for the report and dispute the activity, in many cases, they will correct the mistake without much hassle.
The next step should be looking at short term improvement; credit cards, loans and similar types of repayments are in most cases reported on a monthly basis, as you pay them off each month, your credit rating improves by a few points. On the flip side, a missed payment can reduce your credit rating by a few points.
Small mishaps such as late payments are easier to recover from, in fact some lenders might not report them if they're a one off.
Defaults and bankruptcies are much harder to recover from; typically a bankruptcy takes 7 years to come off your record. You shouldn't wait 7 years to rebuild your credit however; you can start now so that by the time
it comes off you have excellent credit.
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