How to Fix Damaged Credit

A consistent pattern of on-time payments on all your accounts may be the best remedy for fixing your damaged credit. Not missing a payment for 12 to 24 months will likely boost your credit scores, albeit gradually. Eventually you will find it easier to qualify for mortgages, auto loans and other credit. There are other moves you can make as well---but don't expect a quick fix. The Federal Trade Commission says honest credit repair takes time, and that you should avoid so-called credit repair agencies as you rebuild your credit one month at a time.

Instructions

1

Get a copy of your credit report from the website Annual Credit Report. The site is managed by the three nationwide credit bureaus---Experian, Equifax and TransUnion---and offers free credit reports as mandated by the Fair Credit Reporting Act. The act entitles you to three free reports a year, one from each of the bureaus. Order one copy about every four months as you spend one to two years fixing your credit. Visit the website and click on "Request Report" to order, or call 877-322-8228.

2

Study your credit report for all negative information. Focus on the biggest drags on credit scores: delinquent accounts, accounts that have been charged off and sold to collection agencies and accounts over the credit limit.

3

Make payments to make all past-due accounts current. Contact collection agencies, if applicable, and offer to settle charged-off accounts by paying less than the full balance. The collection agencies often buy delinquent accounts for pennies on the dollar, so start negotiating by offering to settle the accounts for say, 20 percent of the balance. So-called debt settlement companies will do this for you for a fee, but the Federal Trade Commission says you're better off settling debts yourself.

4

Address any judgments or liens. Resolve the issues and have them removed. These serious red flags will continue to act as a drag on your credit reports even as you bring all your other accounts current.

5

Open fresh lines of new credit and never miss a payment, while staying far under your credit limit. Consider secured credit cards, which are easy to get because you must put cash in a savings account as collateral. The amount on deposit becomes your credit line.

6

Stay with your plan as you continue to fix and rebuild your credit. Create a weekly or monthly budget so that you stay on track for the long run.