How to Heal Your Credit

It takes a lot more than just a quick Band-Aid to fix your credit situation --- especially if your credit is very poor. You must enact a full-fledged systematic plan for getting your credit in order. Like a bruise or a cut, a bad credit past may hurt and leave a mark; but over time it can heal.

Instructions

1

Admit that you have a credit problem -- that is the first and most important step. If you want to heal your credit instead of slapping a Band-Aid on the problem you must recognize and acknowledge the problem to avoid making the same mistakes in the future.

2

Pull your credit report to get a comprehensive view of your credit situation. You can get one free report each year from each of the major bureaus, which are Transunion, Equifax and Experian. Review all of your accounts, the amounts due and payment history. If you notice a discrepancy, dispute it with the bureau with a phone call or by sending a letter regarding the matter.

3

Call each creditor listed and attempt to make amends. Explain your financial situation and ask for a settlement agreement. Ask for help from a credit counseling service if necessary to negotiate settlements. You have to clear up these old issues in order to properly heal your credit going into the future. If you do not, it usually takes seven to 10 years before credit issues drop from your credit report.

4

Analyze your income and expenses next in a budget format. Make sacrifices in your everyday spending patterns to free up more money for paying off your debts and saving.

5

Commence with paying your open accounts on time and in full. An important part of healing your credit is changing your current behaviors so that in the future creditors and employers can see your positive past payment behaviors.

6

Enact a debt payoff plan if you have outstanding credit card and loan balances. Dedicate any extra money you have available each month after expenses to put toward your principal balance on these accounts to get rid of the debt as quickly as possible. The lower your percentage of debt owed compared to credit available (debt utilization ratio) the better for your credit score.

7

Put any extra money you have available away for a rainy day or to save toward one of your goals. Avoid making purchases unless you have the cash on hand. Stop using credit cards. If you do want to use credit cards for reward points, pay off the balance in full each month.