How to Restore Your Credit Rating

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Is there really a way to restore your credit rating, or do you just have to wait a certain amount of time and suffer until then?

Fortunately for you, there are solutions — and they DON’T have to cost you anything if you’re willing to do the work. But you don’t want to sit and wait and hope your credit fixes itself, because it won’t.

Don’t Declare Bankruptcy

Some people think it’s easy to just declare bankruptcy and get your debts wiped away. While this can help some people, for this discussion it won’t help and it won’t restore your credit. In fact, it will hold you in credit limbo for a number of years.

Here’s how to fix your credit yourself.

Fixing Your Credit

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Emergencies and carelessness often cause our credit scores to go downhill. The lowering of our scores makes getting credit and loans difficult because lenders see you as a high risk for repaying the potential debt back to them. You may still be extended the credit or loan but at higher interest rates.

That said, there are ways to gain back the credit scores you deserve. Follow the steps below and you will be well on your way to restoring the strong credit score you need.

Obtain all three of your credit reports.
A big credit card misconception is that you only need one. You must get all three because each one can contain different data. Sometimes the credit card companies don’t report to all three bureaus, so check and be sure all three have the same facts and figures. Go over each report very carefully.

Note any mistakes and report them to the bureau immediately.  
Even the slightest mistake on your reports can cause you to have a lower score. Make sure all three reports have the same information as each other.

Work with your creditors.  
Negotiate with the companies over the debt and get it paid off if possible. If they report that the debt owed to them has been paid in full, your credit reports will reflect that positive action and your credit score will be raised.

Companies don’t want to continue hounding you and compounding your debt that they may never get paid in the end. If they know they can get something from you now, they’ll often work with you on the solution. You just need to suck it up and talk to them about options.

Make regular payments.
If it’s not possible to pay everyone off right away, then pay as much as you can on a regular basis. Make sure you’re paying all of your bills on time. Late payments, especially recent ones, get on your reports and are negatively factored into your credit scores.

Don’t apply for more debt until your old debt is paid off.
The credit reports will reflect all of the debt that you owe, so the more debt that it shows, the lower your score will be  — until it’s paid off.

Pay off all your old debt first — usually.
If you have a high-interest rate credit card that is racking up your debt, tackle that first. But, as a general rule, you want to pay off your older debt first because it’s a worse mark on your report. Once the debt is paid off, make sure that it’s reported to the credit monitoring agencies.

Keep some old accounts open.
Even when you pay off your credit cards, keep at least some of them open. Closing all of the accounts reflects negatively on your score. Even if you don’t intend on using those accounts again, it still looks better that the account is open and there’s zero balance on it.

It also looks better if you charge very small amounts and then pay it off completely each month on time. It shows your ability to repay your debt.

Don’t pay another company to take care of your credit repair unless you absolutely know that they come highly recommended. It’s best you do the work yourself. Most of the companies that claim they can repair your credit instantly are scams that will take your money and do nothing for your credit. If you work hard, you can bring a negative score to a more positive one with a little diligence in budgeting for your bills and maintaining a timely schedule.

Sources

USA.gov
Experian
Transunion