How to Establish, Clean Up & Restore Credit

Establishing and maintaining a good credit rating is essential. Without it, you may find it more difficult to obtain a loan from the bank in order to make large purchases, such as a car or house. Good credit also makes it easier to rent an apartment and turn on basic utilities. Sometimes, a credit check is performed by employers who wish to ensure that prospective employees are financially responsible. Although it takes time and patience, building a credit history and keeping it in good standing can be accomplished by following a few basic steps.

Instructions

Establishing Credit

1

Create a checking and/or savings account in your name. Of course, opening the account isn't enough. You must also manage it responsibly. Avoid overdrawing the account.

2

Pay off your current debts on time. Proving that you are capable of managing your debt, budgeting and scheduling regular payments will ultimately go a long way to establishing a good credit history.

3

Place your current utility bills, such as electric, gas and cable, in your name. By placing the utilities in your name you create an opportunity to prove that you are responsible with money and capable of paying monthly bills.

4

Apply for a gasoline and/or department store credit card. These types of cards are generally easier to obtain and offer a simple way to establish a credit history, so long as you understand the fees associated with the cards and do not allow the debt to become unmanageable.

Cleaning Up Credit

5

Obtain a recent credit report that contains your credit score, as well as a history of your financial transactions. There are numerous credit bureaus, many online, which will provide your credit report with a fee. You're also entitled to an annual credit report for free.

6

Examine the report to ensure that all of the information is correct, such as your address and employer. Also, check to make sure your payments are accurately recorded.

7

Contact the credit bureau if you notice any inaccuracies in the report. You will need documentation that proves the information included on the credit report is incorrect. Send copies of these documents to the company if necessary. Keep the original documents in your personal file. Also, contact the bureau if you notice any evidence of identity theft on your report, for example, purchases that you are certain you did not make.

Restoring Bad Credit

8

Stop using your credit cards immediately. If you have bad credit, the last thing you want to do is add to your debt. To help avoid making purchases with credit, remove your cards from your purse or wallet. Only make purchases that you can afford on the spot with either cash, a check or debit card.

9

Contact the creditors and ask if they will work with you to set up a payment plan that is manageable. Don't allow the bills to pile up and overwhelm you. This often leads to panic and worse debt. A reasonable payment plan gives you hope and helps you slowly dig out of the hole.

10

Consolidate your debts if possible. This will generally allow you to make one payment in order to pay off your debt. Also, you may be able to obtain a lower interest rate by consolidating.

11

Pay your creditor on time, every time. Don't give up. It may take years to fully restore your credit rating. You must be devoted to paying off your debt, which means budgeting your money and cutting down on unnecessary expenditures.