How to Rebuild Your Credit Rating & Score

Maintaining a good credit score is vital for access to loans and good credit terms. After a financial setback such as late payments, collections, bankruptcy or foreclosure, it is very important to get back on a solid footing with your credit. The ideal scenario for rebuilding your credit depends on your individual situation, but there are steps everyone can take to strengthen their credit rating and improve their score.

Instructions

1

Procure a copy of your credit report and review it for any errors or inaccurate reporting. You are legally entitled to a free copy of your credit report every year. Go to government-sponsored www.annualcreditreport.com to request yours.

2

Dispute any inconsistencies with the three credit reporting agencies---Equifax, Experian and TransUnion. Be sure to accompany any dispute claims with documented proof, such as payoff letters, account statements or bankruptcy papers.

3

Get current on any late accounts and pay your bills on time. When your credit has taken a major hit, it is easy to give up, but this is the time for you to be especially vigilant. Creditors understand that people go through difficulties and make mistakes but want to see that you have learned from your experience and are making responsible credit decisions.

4

Pay off high card balances. Your credit utilization--the amount of credit you are using compared to your available credit limit--and the total amount of your balances count for about 30 percent of your credit score, according to the Federal Citizen Information Center. Reducing both of these numbers will help to boost your score.

5

Avoid opening any new credit accounts unless your creditors have closed all of your existing accounts. If you do open a new account to reestablish some open credit, use it regularly for small amounts and pay the account off in full at the end of the month. This will save you on interest payments and will show a positive pattern of credit use.

6

Negotiate repayment terms on any open collections with the current creditor, who may not be the same entity that originally held the account. If you set terms, get them in writing and stick to them to stop further damage to your score. A creditor cannot continue to negatively report on you if you remain current on your agreement.