5 Tips to Help Repair a Bad Credit Rating

While it may seem like there is little hope if you have a poor personal credit rating, there are steps that you can take to repair it. Working proactively to repair your credit will save you money over the long term as you will be in a better position to secure financing at attractive interest rates. While some individuals hire credit repair agencies to follow this process for them, others work through these tips to repair their credit on their own.

Follow these 5 tips to help repair a bad credit rating:

1- Create a List and Organize Your Debts
The first thing to do when working on repairing your personal credit is to take a thorough inventory of all of your debts. Create a list of each consumer debt, the amount owed, the current interest rate and the minimum required monthly payment amount. You will need this information as you work through the remainder of the tips so even though it will take some time to become better organized, completing this step will save you money over the long term.

2- Review your Current Credit Report
Be sure to request a copy of your current credit report from each credit agency for review. It is important to review reports from each reporting agency as they can each contain slightly different information and numerical scores. As you review each credit report, be sure to begin with checking your personal information. Is your name spelled correctly? Are there any versions of your name that have been listed on the report incorrectly? Review the listed addresses for accuracy. Then, review each credit account listed on the report to ensure that you in fact utilized credit from the company and that all related information is correct. Identity theft has become common so it is important to review each component, including the bad credit components to ensure that they are related to you personally. If there is something that has been reported incorrectly, report this finding immediately to the credit agency and to the company reporting the credit extended to you. If the information can be proven to be false, it will be removed from your credit report, therefore improving your score.

3- Write Responses to the Credit Reporting Agencies
To elaborate on the process of managing facts and information that have been reported on your personal credit report incorrectly, the first step in the process is to create written responses. Create letters for each incorrect fact noticed and send them both to the credit reporting agency and to each individual reporting account. Continue to send letters until they respond or until the item has been corrected or removed from your report.

4- Begin to Re-Build Credit
Once you have removed the negative items from your personal credit report, you will need to begin work on rebuilding your score. Start by using secured credit cards or personal loans. These credit lines extend small amounts of credit based upon you providing the capital that the credit lines are secured against. As you use the credit and repay on time, your credit score will be strengthened. And, once it has been strengthened enough, you will be able to apply for and secure unsecured credit lines. Be patient and work to conservatively build your credit over time.

5- Learn to Use Credit Wisely

The last and probably most important step to take when rebuilding your credit is to learn how to use credit wisely. Consumers run into financial problems when they overextend themselves financially, they borrow too much for their personal incomes or they improperly use the credit that has been extended to them. Use only the credit that you need at the time of purchase or learn how to view credit as a way to leverage your current financial standing. Credit should not be used to purchase items that you cannot afford as over time, you will be placing yourself into a challenging financial situation. Also, learn to use credit for purchases such as homes, property and automobiles instead of just everyday consumer purchases. By learning to use credit wisely, it will be available when you are looking to make these wise financial purchases in the future.

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