How to Repair Bad Credit Solutions

The Federal Trade Commission reports that there is one sure thing about credit repair: it cannot be rushed. The agency insists that the passage of time is the best remedy for bad credit, and that there is no such thing as a quick fix. You can repair your credit by adopting a long-term strategy -- and by ignoring so-called credit repair firms promising to quickly remove negative items from your credit report. The Fair Credit Reporting Act allows negative information to be listed on your credit report for a minimum of seven years, with the impact on your credit score lessening over time.

Instructions

1

Obtain a copy of your credit report from the Annual Credit Report website (see Resources). The site is authorized by the Federal Trade Commission to offer free credit reports under the terms of the Fair Credit Reporting Act. Order your credit score separately, for a fee, by following instructions included on your report.

2

Review your credit report for errors. The Federal Trade Commission reports that by law, incorrect information must be removed by the credit bureau if you file a dispute. The removal of wrong information could boost your credit score, according to MSN Money. Visit the credit bureaus' websites to enter disputes online (see Resources). Or get information for disputing by mail or telephone by clicking on the customer service or "contact us" buttons on the website.

3

Make payments to resolve any delinquent accounts listed on your credit report. Possibilities include old credit card accounts that were closed and sold to debt collection agencies, and other accounts that were closed and listed as charged-off on your report. Also resolve any judgments or liens, and make payments to bring all open accounts current.

4

Review your overall debt. MSNBC reports that you should pay down revolving balances as much as possible, while leaving the credit lines open. At a minimum, pay your credit card and other revolving balances down to no more than 30 percent of the credit line; 10 percent is even better, according to MSNBC.

5

Open additional credit lines over the course of a year. This will allow you to establish new accounts on your credit report with perfect payment histories. Apply for department store or gas station credit cards. Also apply for a secured MasterCard or Visa by depositing cash into a bank or credit union savings account. The bank will hold the deposit as security for the card. Make small charges on the cards, and pay in full each month.

Later, open a secured installment loan account by also depositing money into savings. Before opening the account, confirm that your payment history will be reported to the credit bureaus. Do this by speaking with a loan officer. Deposit the proceeds from the loan back into your savings account, and have the bank draft the payment each month from that account.

6

Pay all of your bills on time every month as you continue to repair your credit. Order a credit report and score every four months to track your progress. You're entitled to three credit reports every 12 months from Annual Credit Report. There is a fee for a credit score each time you order.