In these difficult economic times rampant with unemployment, mortgage foreclosures, overwhelming debt and uncertainty, many people have less than perfect credit. In fact, it is estimated that about one out of five Americans now have bad credit out of the approximate 220 million Americans having information on file with the three national credit bureaus.

Most bad credit problems are due to a history of late or missed payments, failing to pay a debt at all or having excessive debt. Many people unfortunately fall into the trap of taking on loads of debt without having the income to support that debt or income is lost resulting in the inability to repay the debt.

Individuals with a less than desirable credit score are classified as subprime borrowers. Typically a FICO credit score of less than 620 lands you in the subprime arena. This puts a whole new twist on borrowing. With poor credit you are no longer a candidate for consideration by prime lenders (i.e., reputable lenders offering lower interest rates and favorable terms).

In order to begin rebuilding credit you need to be able to reduce or eliminate debt. If you find yourself in a situation where you have unmanageable debt and need to find a way to reduce your payments and your overall debt, a debt consolidation loan may be the answer.

A debt consolidation loan consists of taking out one loan so that you can pay off many other debts. You will then have one payment which is typically much lower and more manageable than having several payments. Debt consolidation is typically a fixed rate loan and can be unsecured. Many times, however, it involves using an asset you own, such as a house, as collateral to back the loan.

Credit card debt is the most common reason for taking out a debt consolidation loan due to their extremely high interest rates.  Debt consolidation loans for people with bad credit are very common.  It is important to know what is in your credit file, what your credit score is and make it a point to shop around.   With time and effort life after credit can result in good credit again.