10 Steps to Repairing Your Credit

Does credit card debt got you down? Does it seem like you will never be free of this weight? If you're struggling with debt, here 10 steps you can take to repair or rebuild your credit. If you’re short on time, energy, or you at your wits end, contact one a Credit Counseling agency.

1. Create a Budget. Calculate your income and your expenses. I recommend tracking your expenses for 30 days before laying down the numbers for your budget. Then see how much you can cut from your expeneses e.g. lowering bills, cutting down on entertainment or leisure activities, etc. Apply the money you save to your debt.

2. Get Your Credit Report By federal law, you can get a copy of your credit report from each credit agency (Equifax, Experian, and Trans Union) annually.You can get all three at once, or spread them out through the year. Go to the AnnualCreditReport.com website.
? Review your reports and look for mistakes.
? Take note of late or missed payments that have been reported and which of your credit lines are at or near the limit.

3. Contact your creditors. As soon as you foresee that you will have trouble making your payments, contact your creditors. Given the economic climate, creditors are willing to work with you to schedule payments that suite your needs or lower your interest rates. After all, they'd rather get $25 payments for the next year than risk getting nothing in bankruptcy court. This is where your budget will come in handy...explain that you have a written budget and only afford $X payment. If necessary, offer to send a copy of your budget. This will show your good faith to pay your debt.

4. Get any agreement in writing. Once you have negotiated a better payment or rate, get the terms in writing. Also, when you pay off your debt, be sure to get a settlement letter that states that you have settled in full. I recommend that you send a copy to the credit bureaus so they can update your credit report and avoid any confusion.

5. Stop Charging. Stop charging and pay as much as you can afford on all cards. Eventually, you will pay off your debt. This is what you’re here for after all. It will take discipline, but will be worth it.

6. Keep some credit accounts open. Don’t close all of your accounts too soon, and be sure to keep a few accounts open to build your credit history with. Be sure not to close more than one card every 3-4 months. Any more than that and you will be putting up red flags on your report of instability. I recommend keeping your oldest accounts open because the length of your account history positively affects your score.

7. Get a secured credit card, if you don't have a traditional credit card. This will be the only way for you to build your credit. A secured card is secured by your money. Your limit is the amount that you pay upfront when opening your account. If you deposit $500 with the bank, your credit limit will be $500. Beware of the high interest rates that secured credit cards are known for. I suggest you pay 90% of your balance every month, on time, to minimize fees.

8. Join a credit union. You have a better chance at getting a loan with the best interest rate from a credit union over a traditional bank.

9. Pay on Time. Negotiate payments with your creditors that you can actually pay. Nothing carries more weight on your score than your payment history. The point is to pay off your cards and get a better score, not pay high fees and ruin your credit.

10. Avoid bankruptcy it stays on your credit for 10 years. While it may take years of work to pay of your cards, you will be glad you did. Don’t take the easy way out.