Your credit is not ruined forever after bankruptcy or a rough spell in which your bills go delinquent and get charged off or sent to debt collectors. Rebuilding good credit takes time, but the Fair Credit Reporting Act (FCRA) helps you clean up your credit bureau files, and financial institutions and credit counselors offer assistance in opening and properly maintaining new accounts.
Credit Clean-Up
Your Equifax, TransUnion and Experian credit reports might have incorrect harmful data along with legitimate negative items. Bob Sullivan of the MSNBC Red Tape Chronicles website warns that errors show up in up to 25 percent of consumer credit files. The FCRA helps you fix this by giving you the right to order free credit reports every 12 months through annualcreditreport.com. The law lets you dispute mistakes and obligates the credit bureaus to investigate and correct your files in 30 days, according to the Federal Trade Commission (FTC). This gets your credit in the best possible shape and raises your credit score if several bad items get removed.
Credit Use
Credit use is essential for rebuilding good financial records, according to MSN Money columnist Liz Pulliam Weston. Secured credit cards are available to almost anyone because you put up your own funds to guarantee them. Your credit union or bank may offer such a card, or you can find one through online credit card databases. Build up an excellent payment history by using the secured card modestly and making payments before the deadline. Eventually the issuer will convert the card to a traditional account, and other lenders will consider your recent payment history when you apply for other cards and loans.
Payments
On-time payments are the most important way to rebuild your credit because the MyFICO credit reporting site advises that they make up the largest part of your credit score. Banks help their customers make timely payments through electronic withdrawals and automatic bill payment services. This keeps you from forgetting to mail a check and prevents unexpected postal delays.
Credit Counseling
Credit counseling is usually associated with bill payment problems, but a good counseling firm offers other services to help you rebuild your credit. The FTC explains that the best counseling companies offer free education materials and classes. Look for online budgeting and money management information or local seminars sponsored by counseling firms. Non-profit firms let you talk to a counselor for free or a very reasonable fee to make sure you are on track for rebuilding your credit and help you make a good plan to maintain your progress.
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