How to Rebuild a Good Credit Rating

A bad credit rating will affect everything from your ability to get a loan to finding housing or a job. If you've made some mistakes with credit in the past, there's no need to have to pay for them for the rest of your life. You can easily rebuild a good credit rating by making some changes to your habits and lifestyle, and with a little knowledge on how credit ratings work and what you can do to improve yours, you'll be eligible for great rates on loans, better interest rates on bank account, and great credit references for housing and employment.

Instructions

1

Get your current credit score. There are a number of legitimate sites on the Internet that can calculate your credit score, but it's best to purchase a detailed report from each of the three credit agencies: TransUnion, Experian, and Equifax. These will give you the most information on what accounts your have open, how much you owe, your credit history, and your personal information on file.

2

Look over each credit report and make sure that all your personal information is accurate and matches. Something as simple as two different addresses on two different credit reports can harm your ability to open a bank account or obtain a loan. If any of the information is incorrect, contact the credit agency by U.S. mail or online to find out how to get it fixed. They will usually have you fill out a form and send it back to them.

3

Check your credit history and make sure that all the accounts listed as yours are accounts you have opened. Make note of anything that is delinquent, and if you find any mistakes, contact the credit agency to get it fixed. If your oldest account is only a few years old, this will affect your credit, but don't worry about that for now.

4

Create a plan to start paying off debt. Two of the things that affects a credit rating the most are the amount of debt you have versus the amount of credit you have, and your debt to income ratio. If you have a lot of debt, start planning on how to pay it off, and don't use the card until it's paid off. If you have too many credit accounts open with too much debt, cut up the card when it's paid off, but don't close the account. Closing the account removes it from your credit history, and will have a negative affect on your credit rating.

5

Look at the other things that could be affecting your credit rating. These are usually the length of your credit history and the amount of credit you have. If you have a short credit history, this will be improved over time, which is why it's important to not close any accounts. If you don't have much available credit, don't open a new credit card unless you have paid off any others you currently have, and you've changed your spending habits. Opening a new credit account will not help if you start spending on it again.

6

Continue monitoring your credit score using free web tools. Some tools can help you estimate how your credit score will improve if you open or close on an account, allow an account to go delinquent for 3-12 months, or declare bankruptcy. Set a reminder on your calender to check your credit rating at least twice a year, or every 6 weeks if you have a poor credit rating. Over time, you will see your credit rating rise.