Can You Repair Your Credit?

Your credit score and history bears great influence on your life, affecting your ability to buy a home, obtain a loan, enter into a cell phone contract, purchase auto insurance and even get a job. When you suffer a financial hardship that results in detriment to your credit, all is not loss. With time and responsible use of credit, you can rebuild your credit score and bounce back from financial disaster.

Your Rights

You have a right to inspect your credit report as often as you would like, and the law allows you access to one free copy of your report from each of the three major credit bureaus every 12 months. If you find discrepancies on your report, you have the right to dispute information you believe to be false by writing to the credit bureaus with supporting information of your dispute. The credit bureaus will investigate your claims within 30 days and make a decision as to whether the claim is legitimate and whether to remove the information from your credit report. You may also write to your creditor to dispute inaccurate information reported on your credit file.

Warning

You may find success in rebuilding your credit by seeking the help of a third-party credit repair company. However, the Federal Trade Commission warns that doing so may make you the target of credit repair scams. The Credit Repair Organizations Act limits the power of credit repair companies, keeping them from charging you a fee until you receive the services you are promised. The law also prohibits a credit repair company from making false claims or beginning the credit repair process until three days after you sign a contract with the company. Despite these rules, many people still fall victim to credit repair scams each year. To avoid being victimized, research your credit repair company with the Better Business Bureau and your state's Attorney General's Office.

Secured Credit Cards

A bad credit score can prevent you from obtaining credit, thus inhibiting your attempts to rebuild your credit history. Fortunately, many credit card companies offer secured credit cards to consumers with poor credit histories. Secured cards work similarly to traditional credit cards, with one exception: collateral. Before opening a secured credit card, you must provide a cash deposit to protect the creditor in case you default on your credit card. However, with regular and responsible use of a secured card, you can rebuild your credit and eventually qualify for unsecured lines of credit and installment loans.

Timeline

If you do nothing else to improve your credit score but pay your bills on time and avoid future negative reporting, your credit score will improve over time. As negative items on your report age, they become less important to your credit score, and newer items begin to carry more weight. After seven years, the negative items on your report will fall off, with the exception of bankruptcy, which may remain on your credit report for a full decade.