How to Rebuild Credit Sensibly

Having poor credit makes routine tasks, such as securing housing and landing employment, difficult. If you have poor credit, there are actions you can take to boost your credit score. There isn't a quick fix to rebuilding credit; however, over time, small changes will make a large difference. Evaluating your credit for areas that need improvement and focusing on those areas will assist in rebuilding credit sensibly.

Instructions

1

Check your credit report. Annual Credit Report (see Resources) offers a free credit report once a year. Look for areas that need improvement, such as a history of late payment or high credit balances. Collections activity will also adversely affect your credit rating.

2

Dispute errors on your credit report. If you find activity on your credit report that isn't accurate, file a dispute with the reporting credit bureau. The company will review your request and remove the inaccuracies from the report if the request is approved.

3

List accounts with high balances. Revolving credit with high balances will pull down your credit score, according to MSN Money. Focus on keeping balances at 30 percent or less of total available credit. For example, if the credit limit is $5,000, pay the balance down to $1,500 or less to improve your credit score.

4

Settle collection activity. Contact creditors to negotiate debt in collections status. Some creditors will settle debt for less than the original amount.

5

Keep revolving credit accounts open. Once credit is paid off, it's tempting to close out the account. However, to rebuild credit, it's important to leave these accounts open. Credit bureaus give higher credit scores to consumers with a long credit history. Having a zero balance will also boost your score.

6

Brainstorm ways to cut costs. Putting extra money towards debt each month will improve your credit score over time. Housing, transportation and food are large categories of spending. Focus on cuts in these areas. For example, securing lower cost housing can free up a large chunk of money each month. Downgrading your vehicle or joining a carpool will also free up extra cash. Use the funds to pay down debt sooner.