How to Fix Bad Credit

Living with debt or bad credit can be very stressful, but help is closer than you realize. Improving your credit rating requires that you take positive action and change your attitude toward money. Follow these steps and be on the road to debt recovery.

Difficulty: Challenging

Instructions

Things You'll Need:

• New Credit Card
• Debt-consolidation Plan
• Credit Report
• Credit Counselor

1. Request a copy of your credit report from a credit bureau. If there is an error, write to the bureau and ask it to fix the mistake. It might also help to contact the creditor who reported the error. Some creditors will contact the bureau on your behalf.

2. If the bad marks on your credit report result from outstanding debts, repay them as quickly as possible. Pay off those with the highest interest rates first.

3. If your debts are overwhelming, contact a nonprofit credit-counseling organization to work out a debt-consolidation plan. A counselor will help you consolidate your debts and will contact your debtors on your behalf to reduce or eliminate finance charges. This can reduce your monthly payments by up to 40 percent.

4. Steer clear of any services that offer you credit-repair or debt-consolidation loans. These companies will plunge you further into debt. Be suspicious of any company that advertises aggressively or sends unsolicited mail or e-mail.

5. Close your credit accounts and cut up the cards. Sell valuables or liquidate assets that will help you repay your debts. Buy the bare essentials (food and gas) and use the rest of your earnings to pay off your consolidated debts.

6. Work with your credit counselor to repay all of your debts. Meanwhile, live a life that will help you re-establish good credit. Pay rent and utilities or mortgages promptly, keep the same residence and job, maintain savings and checking accounts, set a budget and stick to it.

7. Once you have repaid your debts, apply for a new credit card to build a good credit history. It might be easier initially to get a department-store or gasoline credit card or one from an employee credit union.

8. Promptly pay off the balance of the credit card monthly to build good credit. Use the card responsibly.

9. If you don't qualify for a regular credit card, apply for a secured one. With a secured credit card, you fund an account up front and then "charge" expenses on it. This card will show up as a credit card on your credit report and, if used responsibly, can help you build a good credit history.

Tips & Warnings

• Get a copy of your credit report once a year even if you think you have good credit. You may find errors that will damage your credit rating.
• Filing for bankruptcy is always an option, although your credit history will reflect it for 7 to 10 years, making it very difficult for you to get a car or home loan in the future.
• Creditors agree to reduce or eliminate interest rates under a debt-consolidation plan because it saves them the expense of collection efforts and increases their chances of recouping the balance.
• Every application you make for a credit card shows up on your credit report, and multiple applications can hurt your credit rating. To avoid this, use an online service that matches you with creditcard companies that will extend credit to you. Search online for "credit card finder" or "credit card search."

[interstudy]

on 11/13/2009 paying off your old debts is certainly the morall thing to do. After all it is your debt. But once a debt is reported as negative and defaulted, it will remain that way until it falls off your report. Whether its paid or not. You are better off focusing on the now. Use that money to get a secured card, or to keep another bill from defaulting and reporting negative.
Learn How To Live With Your Bad Credit

http://badcreditanddebt.blogspot.com/

[nickjustice]

on 9/20/2009 Great Tips! Poor credit can be an awful downward spiral, i am embarrassed to say i had all my credit cards maxed out at one point. I was in deep trouble until my friend recommended i get a free credit repair consultation, i was able to overcome my poor credit score quickly. Heres a link where i got a free consultation i thought i would share it to help everyone, http://cli.gs/credit-repair

[latoyao]

on 7/5/2009 Should I pay off any closed accounts on my credit report?

[klmorrill]

on 5/4/2009 I am trying to rebuild after a divorce. My ex took the house and our one credit card but let the house go back to the bank and is not paying on the credit card. Even though the courts say I am not responsible for that debt it has destroyed my credit...what do I do?!?!?!?!

[lilredridin]

on 3/18/2009 I have also been told to not let you credit cards sit at over there half way limit. So if you have a card with a $5000 limit don't let it be over $2500. This shows that you don't have your cards maxed out, but are using credit.