How to Restore My Credit Rating

Your credit rating is very important to your financial life. It determines whether you are approved for loans, as well as the interest rates you get. Your credit can even determine your insurance premiums and whether or not you get a job. Mistakes can lead to a poor credit rating that can become costly. The good news is that you can restore your good credit if you practice financial discipline.

Instructions

1

Cut expenses and live within your means. Before you can begin restoring your credit rating, you need to establish a budget that allows you to track your income and your expenses--and make sure that you are living within your means.

2

Stop applying for new credit. Every time you apply for a new loan, your credit score is lowered. In order to restore your credit rating, you need to show that you are no longer applying for credit.

3

Pay down debt. Start with payday loans and credit cards. Move on to other consumer loans and student loans. Your debt load should be no more than 30 percent of your available credit for best results.

4

Make all your payments on time and in full. Missing payments will result in a lower credit rating.

5

Use credit wisely from now on. Once you have re-established your good credit rating (this can take anywhere from two months to several years, depending on the state of your credit), use credit wisely. Open new loans with caution, and make sure you borrow only what you can afford to pay off through reasonable installments. With credit cards, try to pay off the balance monthly, carrying a balance no more than two months if necessary.