3 Mistakes That Make a Bad Credit Situation Worse

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While bad credit isn't an indictment of a person's character, it can certainly be a struggle in today's economy. Those with bad credit know that financial life becomes more challenging and can be more expensive in general.

Your credit is officially bad if you're one of 68 million Americans with a FICO score that hovers near 600 or below. The good news is there are practical steps people can take to improve their credit scores. Paying your bills on time and working diligently to pay off debts are good ways to start.

But people with bad credit need to, above all else, be patient. Falling into the lure of quick fixes can lead to the following mistakes and compound your problem of poor credit. (See also: 5 Ways to Improve Your Credit Score Fast)

1. Falling for debt relief or credit repair scams

The Federal Trade Commission released a survey in 2013 showing that of the 25 million people victimized by fraud, an estimated 1.5 million and 1.7 million Americans were scammed by debt relief or credit repair scams, respectively.

Often the disreputable agencies behind these scams prey on people in dire financial circumstances by promising overnight fixes and charging large sums of money upfront before any work has been completed — both of which are illegal.

The FTC warns consumers to avoid working with any debt relief or credit repair agency that sets off red flags. Notable warning signs include a company that:

• Insists you pay money upfront to do any work on your behalf.

• Requires that you don't contact the credit reporting companies directly.

• Suggests you dispute accurate information on your credit report.

• Tells you to falsify any information on your applications for credit or a loan.

• Will not explain your legal rights when explaining their services.

Cleaning up your credit will be the result of improved financial habits like paying your monthly bills in a timely manner and making more than the minimum payments. These improved habits will need to be consistent over a period of time. Knowing this will help those with poor credit resist the temptation to seek quick fixes and be taken advantage of by predators. (See also: How to Spot a Credit Repair Scam)

2. Not learning how to use credit responsibly

It's understandable that 68 million Americans fall into the poor credit bucket. But, your story doesn't need to stop there. Those with poor credit must take the initiative to educate themselves about the benefits of good credit and to learn what concrete steps are needed to fix their credit.

The largest factors that make up your credit score are payment history (35 percent) and how much you owe (30 percent). Again, paying on time and paying down your balances is the best thing you can do to improve your credit score.

If you prefer to work with a professional, opt for nonprofit credit counselors. To ensure you are working with a reputable agency:

• Locate a local service from associations like the National Foundation for Credit Counseling.

• Check with your state's attorney general and the FTC to ensure there are no complaints or pending regulatory action against the agency. While a complaint doesn't necessarily signify a fraudulent agency, do your own research.

• Make sure you understand what services the counselor performs and know your rights as a consumer before you sign any agreements. (See also: 5 Signs It's Time to See a Credit Counselor)

3. Avoiding the problem and hoping that things will get better

This by far is the worst action someone with poor credit can take. Problems neglected will only get progressively worse and cost more time and energy to address in the future — when avoiding them is no longer an option. Whether you face a lawsuit, a wage garnishment, or are eventually forced to file bankruptcy, financial issues that have resulted in poor credit will eventually bubble up to the top of your must-do list.

It's best to contact your creditors directly if you have trouble paying. Set up a payment arrangement or request a change in the terms of your payment agreement. Changing the due date and requesting an interest rate reduction are simple requests that can often be addressed by customer service representatives. (See also: 4 Ways to Negotiate Credit Card Debt)

Know that burying your head in the sand will not help and is an unproductive mistake that people with bad credit make. Work with the creditor involved or a reputable credit counselor to arrange a workable solution. (See also: How to Rebuild Your Credit in 8 Simple Steps)

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