How Is Credit Restoration Done After Debt Consolidation?

Debt consolidation programs can help you get your debt under control and create a payment plan that you can afford. Debt mismanagement that leads to the need for consolidation can damage your credit. Consolidating your debt is only the beginning of restoring your credit. Consumers who follow a credit restoration plan can recover their good credit over time, according to credit expert Dani Arthur writing on the Bankrate website.

Spending

Your spending habits after consolidation need to be altered to make your consolidation a success. Do not destroy your old credit cards and close your old accounts. Closing old accounts can lower your credit score. Use your old cards, but only in amounts that you can pay off each month. Continued positive activity on your old credit accounts will start to repair your credit rating.

Budget

Develop a monthly budget that makes sure your bills are no higher than your income and also helps you to plan on using cash. While you want to use your old credit cards to an extent, get into the habit of using cash rather than building up more credit card debt. Follow your budget closely and revise it each month to accommodate new bills or to set aside money for future purchases.

Pay on Time

Nearly 35 percent of your credit score is based on whether you pay your bills on time. Use your budget to create a payment schedule for your bills so that you pay them on time each month. The more consistently you pay your bills on time, the faster you begin to restore your credit.

Credit Reports

Your credit reports hold all the credit information that future creditors will see, and that has an effect on your credit score. Every American consumer is entitled to a free copy of his credit report from each of the three major credit reporting agencies every 12 months. Get copies of your credit report -- order them at annualcreditreports.com -- and make sure your personal information is correct and that all your current and past credit account information is correct. This includes credit limits, accounts paid off in good standing and payment histories. If you see information that is incorrect, use the dispute process outlined on each credit report to correct them. For incorrect information on current accounts, contact your creditor to have them corrected.