While it will take years to remove all bad history from your credit report, you can recoup most of the damage relatively soon and you won't need to spend thousands of dollars to get there. Fixing a credit score is a situation where intuition usually proves correct: just pay your bills on time. You can take some actions to speed up the rebuilding process.
Check Reports
You can have great borrowing habits, but errors can do significant harm to your credit. Check your own credit for free via AnnualCreditReport.com, obtaining reports from all three consumer credit reporting agencies. Review report details on every account, including balances due. When the creditor reports what seems like a minor mistakes, such as a lower than normal credit limit, this can hurt your score because it looks like you are using a higher percent of your available credit than you really need.
Personal Repairs
The credit bureaus themselves can tell you how to repair your credit, so you do not need to spend thousands on a company to give you free information, according to the Federal Trade Commission. A credit repair company can only benefit you if you have lots of errors or need to deal with creditors, but you do not have the time or ability to handle this on your own.
FICO Score
Look at the factors in the FICO score -- the only one that truly matters in the consumer credit industry -- for what goes into your score and compare it to your report. When you have lots of missed payments, calculate a budget that lets you meet the minimum payment each month. This may mean giving up luxuries, such as cable TV and takeout meals. Most of what you need to do is just pay down existing debt balances and do it on time. When you have collections or charge off accounts, paying them does not improve your score beyond lowering your debt load.
Credit Profile
Your credit report may have no record of some of your credit accounts. When you see an omission, send in statements from the account and proof of payment, such as a canceled check to the credit reporting bureau. The bureaus do not have to add the account, but they often do. Update the demographic information in your profile. Demographic data does not impact your credit score, but lenders want to signs of a stable life, such as staying at the same job for years, a listed telephone number and current residence.
Advanced Tactics
Find someone with a good credit history to add you as a joint account holder. The good history on the account transfer to your profile too. You can open a new account to start building good credit history, but this comes with some drawbacks. New accounts lower your average account age and usually come with a hard credit check, which lowers your score a few points. Since you have bad credit, you can probably only find a secured account backed by a deposit. (ref 5 and 6)
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