The Federal Trade Commission recently conducted a study on the accuracy of consumer credit reports, which revealed 26% of the 1,001 participants found at least one error on at least one of their credit reports. This finding is alarming because it uncovers the possibility that you’re unfairly experiencing the negative effects of bad credit.

Regardless of whether your report accurately reveals a bad credit score or not, bad credit can greatly affect your financial future. And because of this, it is important that you’re familiar with your credit score and that you’re aware of the implications of bad credit.

Check Your Credit Report
First things first. Request your credit report from each of the three credit bureaus. By law, TransUnion, Experian, and Equifax must each supply you with a free credit report every 12 months.

Your credit report will show a three-digit number. According to FreeScore, scores that exceed 720 are considered excellent credit, while good credit scores usually fall between 680 and 719, and average credit scores range from 620 to 679. These are ideal numbers, which reflect favorable credit standing. If your score drops below 619, however, you may start experiencing the negative implications of poor and bad credit.

Now that you have a better understanding of the scoring, you should compare your scores on all three reports and flag down any errors. If you find any discrepancies, immediately contact (in writing) the credit bureau and the vendor who reported the issue. In most cases, credit reporting companies must investigate your claim.

Effects of Bad Credit Scores
So regardless of its accuracy, let’s say your credit report calculates a bad credit score. What’s the big deal?

You don’t want a bad credit score because it alerts organizations that you are a high risk applicant with a history of irresponsible financing. Because of this, creditors and lenders may not want to loan you money, while others will charge you higher fees and interest rates. This is especially problematic because it could affect your chances of purchasing a car or starting your own business if you’re barred from applying for loans.

The same is true for when you’re looking to rent property and acquire utilities. Landlords might refuse your application out of fear that you’ll miss monthly bills, and utility companies may charge you a pricey security deposit if you have a history of poor credit.

Options for Those with Bad Credit
If you discover that your bad credit score is in fact correct, there are still options available for you. When your score is anything but good or excellent, you should look into ways to repair it. You may want to seek help from a financial adviser or The Association of Independent Consumer Credit Counseling Agencies (AICCCA) to learn how to consolidate your debt, make timely payments, save money, and rebuild your credit.

You could also consider applying for a secured credit card that requires you to pay a deposit in case you fail to make your payments. This is a good way to build credit, as the card issuer can send your new credit history to the credit bureaus. However, only apply for this kind of credit card if you are capable of paying on time and keeping your balances in check.

In the case of an emergency situation in which you need fast cash, you could also apply for a bad credit loan, which doesn’t take into account your credit history. Keep in mind, these loans come with high interest rates and fees, so only use it as a one-time fix if you have the means of paying it back on time. Failing to repay this loan in short order or applying for multiple ones at once will only cause you more financial trouble.

The Bottom Line
Ensure that your credit report is accurate so that you’re not unjustly limited when it comes time to renting a home, applying for a loan, or interviewing for a job. If your credit report is incorrect, go to all extremes to fix it. And as for those with correctly reported bad credit scores, focus your efforts on finding ways to repair your credit score!