Adverse credit history is the polite “put it in writing” way of saying you don’t have good credit . It could mean you have a bad or poor credit history or it could mean you have no credit history at all, either way it’s not a good thing.
How do you fight back from a creditor saying you have an adverse credit history? First, it depends if you actually have bad credit or if you simply have no credit history whatsoever. In the adverse credit letter, the lender or creditor should’ve listed some risk factor codes  based on the credit report they used. These codes should give you an indication of which category you fall into.
Request your credit report to see if there are any erroneous negative items listed. Just this past year I discovered a error on my report that had lowered my score by at least 30 points. It was a collections for a telephone bill I was never responsible for (in a town I never lived in), so I disputed it and had it removed. You should review your credit report regularly because you never know what might be erroneously assigned to you. Thirty points is enough to move you from poor credit to “average” credit.
Recovering from Bad Credit
Recovering from bad credit takes good behavior and at least a year or two. I recently learned that you can have your home foreclosed on and, if you do things right, the effects will be reduced significantly after two years. You need to:
- Use a credit card responsibly by never exceeding your credit limit and paying on time. Ideally, try not to carry a balance because it’ll save you money.
- Don’t apply for new credit cards or lines of credit. With bad credit, the chances you are approved are slim and each inquiry will result in a ding to your score.
- Be patient. Your score will rise over time and there’s nothing you can do to make it rise faster at this point.
If you have no access to credit, consider getting a secured credit card that doesn’t charge exorbitant fees. Secured credit cards require you to put down a deposit. That deposit becomes your credit limit, it secures that limit, and you get to use it like a credit card. The charges you make are charged interest, so it’s not like a debit card or a rechargeable money card. The benefit of doing it this way is that, for credit reporting purposes, your secured credit card is treated as a line of credit and helps you build a history.
Building a Credit History
If you have no credit history, it’s much easier to fend off an adverse credit history determination. If you have a job with a salary, and still received this letter, you likely applied for a card that required excellent credit history. Most unsecured credit cards will approve you if you have no history and you have a job with an income, but the better cards (reward cards, loyalty cards) won’t because they don’t want to deal with people without good credit (even though you don’t have bad credit, no credit is only one step better).
The key is to start building a credit history  by applying for cards available to those with “good credit.” I personally like the approach of applying for department store credit cards, which have lower limits and lower credit requirements. Use those responsibly for a year and then try to get the card you want.
Remember, the most important component in your credit score is time – you need to show a history of responsible use of credit so don’t get discouraged, stick with it, and you’ll have a good credit score in no time.
(Photo: dplanet )