How to Fix Horrible Credit

If you have gone through bankruptcy or have credit balances that have gone to collection agencies, do not get discouraged. Rebuilding good credit can take some time and effort, but it can be done sooner than you might think. According to the Fair Credit Reporting Act, credit reporting agencies may list negative information in your reports for seven years and bankruptcies for ten years. Despite this systems, you do not have to wait that long to start rebuilding your credit. (http://www.ftc.gov/os/statutes/031224fcra.pdf section 605)

Instructions

How to Fix Horrible Credit

1

Get out of debt. Pay off or settle accounts that have gone to collection. Pay down any other debt. If your debt is too overwhelming, you may want to talk to a lawyer or financial counselor about bankruptcy.

2

Check your credit reports with the three major reporting agencies: Equifax, TransUnion, and Experian. Make sure there are no mistakes and make sure the information is current. If you have paid off accounts, make sure the report says so. If you have had debt discharged in bankruptcy proceedings, make sure the accounts that were discharged indicate that they were included in bankruptcy.

3

Keep paying on current loans. If you have a house payment or student loans that you have been keeping up with, keep paying those. This type of debt is called installment credit and making payments on time will help improve credit scores. Even if you have been through bankruptcy, you will still have to pay off your student loans.

4

Use secured credit. Your bank most likely offers secured credit cards where you pay a certain amount into an account and then use a credit card off of that balance. Make sure your bank reports this account activity to the major credit reporting agencies before you sign up. Be careful not to use more credit than you can pay off every month. This type of credit is called revolving credit. A a record of making regular payments on a revolving credit line can also help improve credit scores.

5

Switch to unsecured credit. After one or two years of making on time payments on your secured credit card, the bank should let you switch to unsecured credit, which is a regular credit card. You will probably have to pay a higher interest rate for a while though. (http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/BounceBackFastAfterBankruptcy.aspx?page=2 )

6

Keep paying debtors on time. Keep up with your monthly payments and you may be able to build up a decent credit rating before very long. According to MSN Money, some people have raised their credit scores to the upper 600 range just four years after filing for bankruptcy. (http://articles.moneycentral.msn.com/Banking/BankruptcyGuide/BounceBackFastAfterBankruptcy.aspx?page=1)