How to Rebuild Credit After Making Late Payments

Your credit history is the fundamental key to getting a loan for an automobile, a house and, in some cases, getting a better job. Consistent late payments an greatly damage your credit history and, in turn, damage your chances of receiving that loan. There are several steps you can take to turn your credit around. Remember, though, it will take time and some patience.

Instructions

1

Start paying your debts on time. It sounds simple, but make sure that you understand the terms of your debts. If a bill is due on the 15th of each month, you need to pay the bill by the15th, not the 16th or 17th. Use online or telephone bill paying for immediate credit of your payments. If you mail in your payments, do it at least a week ahead of time.

2

Communicate with your creditors. The first step to repairing bad credit is to repair your relationship with those that you owe money. Pick up the phone and review the terms of your debt. Find out if you can lower your payments if you are having trouble paying your debts at the original terms on time.

3

Try to pay off outstanding debts in full. If you cannot, pay a little extra each month on accounts that carry interest rates. This technique will draw down the debt quicker since less interest will accrue.

4

Pay off high-interest loans and debt first. This technique will save you money in the long run since less interest will accrue.

5

Close credit-card accounts you are not using. Creditors look at the number of accounts a person has open. The more accounts open, the more debt you can accrue. This has a negative effect on your perceived creditworthiness. Close more-recently-opened cards first. Credit-rating agencies like to see a history of on-time payments and responsible credit behavior.

6

Analyze your credit, debt and income. The key to good credit is a strong debt-to-income ratio. The more you make and the less you spend on bills, such as credit cards and debt, the better credit you will have. Also, there is good debt and bad debt. Debt due to a purchase of a house is better on a credit report than a revolving line of credit at a department store that never gets paid off in full.

7

Negotiate with your creditors. After paying on time for a few months, call them and ask if they would be willing to remove a late payment mark on your credit history or reduce the total amount owed if you pay your debt in full.