We all want things in life. A dream house, a better car, or a perfect job. Sometimes we get the chance to obtain them, they’re right there in our grasp ... and then there’s nothing as bad as having it snatched away. Even worse is when the thing we had our hearts set on is taken away because of bad credit. Some people get by without credit, but not many. For most people in America, good credit history is vital if you want to buy a house or car, getting a credit card, or even connecting your telephone service. Fortunately, no matter what’s happened in your past, your credit score can be improved, and you can start creating positive history. Once you get back on the straight and narrow, you’ll have more chances to prove yourself and more opportunities will be extended to you.
The very first step is to identify that there is a problem, and to seek out the root cause. Your bad credit might be because you lost your job and couldn’t pay your bills, or perhaps there was a serious illness that debilitated you for several months. If that’s the case, you have nothing to apologize for; you just have to get back on track and work to rebuild your good credit history and credit score.
On the other hand, if your bad credit is because of your own actions — poor spending habits, compulsive shopping, unnecessary expenditures, etc. — then you need to acknowledge that and change your ways. You might need counseling. But you need to accept the responsibility for your behavior and resolve to change your habits. Bear in mind that it will take a while to rebuild good credit history. You didn’t ruin it overnight, so you can’t fix it overnight, either. But if you have fair credit -- not great, but not too bad either -- you might be able to improve your creditworthiness in a matter of a couple months or so.
Things like bankruptcy, foreclosure, judgments, and liens will stick with you for a while, though. They can stay on your credit report and affect your credit score for as long as 10 years. But don’t be discouraged! You can start working on reversing their effects right away, and you’ll see improvements within a couple years. Your credit score will be on the rise once again.
Next, get a copy of your credit report from the credit bureaus, which are TransUnion, Experian, and Equifax. Look over them carefully to make sure the information is completely factual and current. If anything is amiss, information the credit bureaus at once and make sure it is corrected.
There might be some negative information on that credit report. If it’s accurate, fair, and up-to-date, there’s not much you can do about it. But sometimes there will be something that is accurate, but misleading. Or information that is true but several years old and thus no longer applicable. If something is on your credit report and it belongs there, you can’t have it removed, but you can write a 100-word explanation giving your side of the story. The credit bureaus will attach your explanation to the item, so that anyone seeing the item will also see your comments. It’s better than nothing.
Having done that, you might still have a credit report that is less than stellar. All you can do to combat that is to establish good credit history in its place. The more months you make on-time payments and don’t go over your limits, the more those old, previous mistakes start to get pushed aside and outweighed. Eventually, your most recent activity will far outshine whatever negative stuff there is in the past.
Next we come to the tricky part: committing yourself to your strategy of improving your credit score, spending wisely, and being patient. First up, you have to pay off as much outstanding debt as you can, especially if any of it is overdue. Debts that are due but delinquent are the worst thing you can have on your credit report, and your credit score will plummet because of them. First come up with a payment plan for yourself that is reasonable and realistic. You want to pay back that overdue debt as soon as possible, while continuing to be on time with the accounts where you’re currently in good standing. In general, lenders will try to cooperate with you in establishing repayment plans, if they see that you’re genuinely trying to make an effort. After your plan is set up, do all that is humanly possible to pay on time every month, no matter what. That will prove that you’re committed to it and that you can be relied upon to keep your word. This is a very crucial time in your credit history, because it shows that you’ve reached a turning point and are making changes for the better.
Now that you’re back on track with your monthly bills, you should open one or two new credit accounts to aid in the process of rebuilding. There are credit cards for people with bad credit and who need help improving credit history. Talk to your local bank or credit union, explain that you’ve had trouble in the past, and that you’re committed to making changes and establishing good credit history.
They still might turn you down. If they do, you can apply for a secured credit card, which works like a regular card except that you must pre-pay a certain amount (usually as much as your credit limit). If you use a secured card and pay it off in full every month, that will establish a good trend and lead to a regular credit card. Another option is where you talk to a friend or relative or trusted adviser about co-signing a credit card with you. This requires a lot of trust, of course, because if you default on your payments, your co-signer will be on the hook for whatever you’ve borrowed.
Whatever method you choose, look at your credit report and score again in a year or so and see what positive changes have occurred. Make sure all the latest, positive information is included. That might be the time to try for an unsecured credit card, if you were turned down before.
From then on, you can continually maintain good credit history by spending wisely, keeping your credit card balances to minimum, and paying your bills on time every single month, no matter what.
There are no magic wands you can wave to improve your credit history, no secret tricks you can use — and beware of “credit repair” companies that claim otherwise. It just takes time and patience. Eventually, the negative information will be pushed aside by new, positive information, and your credit score will soar once again.
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