For something that is so important in our lives, it is odd that very few people know their score and how it is determined. The five factors that determine your credit score (in the order of importance) are:

1. Are your bills paid on time?
2. How close you are to using up all the credit extended to you (approved credit lines)
3. How often you request credit (the more you do it the worse your score is)
4. The types of debt you have (secured like a mortgage or unsecured like credit card debt)
5. How long you have had credit from each company you borrow from

What does all this mean? To summarize, you more you have established credit relationships that you have been paying off on time without constantly applying for new credit cards, the better off your score will be.

Treat your credit cards like a any relationship you want in your life, namely:

Your credit score will affect your entire financial life including your debt accumulation so take steps to improve it. After all there is no use in paying higher rates than the next guy if you don’t have to.

You can check your credit score through one of the 3 major credit bureaus and if it is bad you need 2 key things to restore it back to good health:

1. Short term loans that you pay back promptly
2. Time

In short, you need to rebuild your track record in the eyes of the system that determines your score. In order for that system to raise your score, you need to show it you’ve turned the corner and pay your bills promptly for a decent period of time.

Start paying your bills on time and if you are able to get additional credit (say in the form of a credit card) do so and put small amounts on it that you are 100% positive you will be able to pay off ON TIME every month. Don’t spend anymore than you would if you were only spending cash and keep a log of exactly waht you’ve spent that month so you are not surprised when the bill shows up at the end of the month.

Remember you are trying to get out of debt and rebuild your credit at the same time – it takes financial discipline.

In each case, the fact that you already have bad credit is not a big drawback. In fact, it may make the decision to use professional debt relief easier since that is one major drawback to some debt relief solutions. People that have good credit but find themselves in trouble often do not want to risk poor credit unless they have no other choice.

What’s important in seeking debt help even with bad credit is that you have some income available to pay off your debt over time through a fixed monthly payment the debt relief company will set up for you.

Debt settlement can reduce the amount you owe by as much as 50-65%. With debt settlement, your credit score will get worse but you certainly do not need to start out with good credit to enroll and the damage it does is less severe than filing for bankruptcy. If your credit is very bad already you need to ask yourself, does it really matter if it gets worse in return for getting out of debt in 3 years or less.

Debt management plans will actually not affect your credit as much as debt settlement. However, your debt payments will not be reduced nearly as much as with debt settlement.