How Can a Person Rebuild His/Her Credit?

If you have gone through a bankruptcy or experienced significant financial difficulties that have made it hard for you to pay your creditors back, you probably have a very low credit rating. While there is little you can do to change what has happened in the past, you can begin the process of improving your creditworthiness, generally referred to as rebuilding credit.

Inspecting Credit

The credit rebuilding process begins with knowing exactly what your credit is. All consumers have the right under federal law to inspect their credit reports once each year without charge. You can request your report from the Federal Trade Commission-authorized website, AnnualCreditReport.com. If there are any mistakes on your report, contact the credit reporting agency upon whose report the mistake appears and provide it with evidence that proves the information is an error in order to have it removed.

Borrowers

Your credit report exists because creditors want an easy way to evaluate how risky a potential borrower is. By using a uniform set of credit reports, creditors can more easily determine whether or not a borrower should get a loan. When you rebuild credit, what you are doing is showing potential creditors that even though in the past you were a risky borrower, you have since changed and now represent little risk to them.

Factors

The way in which you prove to potential creditors that you are no longer a credit risk is by engaging in very specific behaviors that creditors believe show you to be a safe borrower. These include paying all your bills on time, not using more than about 25 percent of your credit limit on any credit card, maintaining a variety of various kinds of credit and doing all of these things over a long period of time.

Repair

You cannot change what happened in the past, but you can control what you do now. Regardless of how bad your credit score was, if you start paying back all your bills and in other ways showing your creditors that you are responsible borrower, your score will go up and you will rebuild your credit. There is no one single solution to doing this, though all it requires is for you to engage in the kind of responsible borrower activity that creditors value.