Steps to Improving Poor Credit

Having a poor credit rating can harm your credit applications and even hurt your chances for certain job opportunities. And there are benefits to good credit---the best interest rates on mortgage loans, lower insurance premiums and easier loan approvals. Rather than live with "less than perfect credit," consider ways to bring up your score.

Overcoming Denial

Some people with low credit scores are in denial or don't recognize the seriousness of their situation. They may avoid checking their credit report or score because they don't want to face the truth. However, improving a poor credit score involves acknowledging bad credit and habits that led to a low rating. Ordering your credit report is key to reversing bad credit. Your personal report summarizes your entire credit history and shows what lenders and creditors are reporting. Get your personal copy from AnnualCreditReport.com and consider areas that need improvement such as high debts and late payments.

Contacting Old Creditors

If you haven't paid a creditor in weeks, months or longer, get on the phone and call them to setup a new repayment plan. Creditors and lenders are ready to work with you as long as you communicate your situation. They may lower your payment or change your due date to accommodate your finances. Start paying these creditors on time every month to rebuild the relationship and add positive information to your credit report.

Resolving Debt

Debt is another credit score killer, and carrying excessive debt on credit cards can prevent a high credit score. Fortunately, a better credit score often follows debt elimination. Debts make up 30 percent of credit ratings, and paying off your credit cards and reducing the balance on loans has a significant impact on your personal score. Debt elimination involves a plan of action---stop using credit cards, increase monthly payments and pay off new charges each month.

Starting Over

Sometimes, improving a poor credit history involves starting over and rebuilding credit from scratch. This is true if you've filed bankruptcy in the past. A bankruptcy can eliminate your debt obligations and leave you with an extremely low credit rating. Credit cards for people with bad credit have high interest rates, usually require a security deposit and have low credit limits. However, they're necessary to help you rebuild your FICO credit rating. Talk to your bank about these credit cards or research credit card offers online (see Resources).