How to Restore Personal Credit

Restoring your personal credit after a setback will require determination, time and patience. Foreclosures, bankruptcies, late payments and other negative credit events will cause your credit score to sink. The good news is that your credit can recover. Creditors are more concerned with your current credit score and finances than financial setbacks that took place several years ago. Using credit responsibly will show that you have put your credit problems behind you.

Instructions

1

Order your credit report for free from AnnualCreditReport.com (see Resources). You're entitled to three free credit reports every 12 months from the website, according to the Federal Trade Commission.

2

Review your credit report for negative entries. These include accounts that are currently reporting as past-due and delinquent accounts that have been sold or assigned to debt collection agencies. Make payments to bring any open accounts current, if necessary. Also contact original creditors or debt collectors to make payment arrangements on old, delinquent accounts.

3

Dispute wrong or outdated information on your report. This is the only option for removing information on your credit report, according to the FTC. The agency reports that bankruptcy information can remain on your report for 10 years, but all other negative information must be removed after seven years. Wrong information can be removed at any time. Dispute wrong or outdated information by writing letters to the credit bureaus at their address listed on the report. The AnnualCreditReport.com allows you to order separate credit reports from all three nationwide credit bureaus -- Equifax, TransUnion and Experian.

4

Check the balances on all your revolving credit accounts, such as credit cards. You should pay down the balances to at least 30 percent of your credit limit on each account. Paying down balances even lower is even better, MSN Money reports.

5

Establish a plan for paying all your debts on time ever month -- without fail. A single missed payment can cause your credit score to drop, according to Privacy Rights Clearinghouse, a national nonprofit consumer information company. Schedule on-time payments with the help of your bank's online bill-paying software, or begin making biweekly payments to get ahead. Biweekly payments will result in 26 payments in a year instead of 12 if paying monthly.