How to Repair Horrible Credit

Credit history has a direct affect on your credit score, says Entrepreneur Magazine in an article about personal finance. Employers, insurance companies and lenders use credit scores to evaluate application materials. Even if you have horrible credit, there are steps you can take to repair it. Cleaning up credit won't happen over night. However, making a few changes will repair horrible credit over time.

Instructions

1

Request a copy of your credit report. The first step in repairing horrible credit is reviewing your credit report. A free credit report can be obtained from Annual Credit Report. Circle problem areas, such as late payments, accounts in collections and other credit blemishes.

2

Settle accounts in collections. Contact creditors to resolve delinquent accounts. Ask to set-up repayment plans. Some creditors may consider taking cash settlements (less than the amount owed) for debt obligations. Settling these accounts will help repair your credit.

3

Set-up automatic payments with your financial institutions. Payment history has a large effect on your credit score, according to Entrepreneur Magazine. Setting up automatic payments each month will ensure you don't make a late payment again.

4

Pay down debt obligation balances. High balances on revolving credit (such as equity lines of credit or credit cards) can drag down your credit rating. Entrepreneur Magazine says that balances should stay below 35 percent of the total available credit to improve your credit rating. If you have trouble finding funds to pay off debt, consider cutting back on transportation or entertainment expenses. Carpooling or scaling back on eating out could save you hundreds of dollars monthly.

5

Keep old accounts open. Paying off accounts is an accomplishment. However, don't close these accounts. The credit bureau favors consumers with a long credit history. Keep old accounts open. If you use the accounts, pay them off each month to avoid getting into additional debt.