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What are the steps to Repairing your Credit?

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First, understand how credit works and what the credit-reporting agencies are saying about you. You can order a copy of your credit report and get your credit score online from any of the three major credit-reporting agencies – Equifax, Experian or TransUnion. Stay away from credit-repair clinics that offer to clean up your credit and promise to remove negative information from your file. There are no special tricks that these credit repair clinics know. You can clean up your credit report yourself.

Here are five steps to credit repair:

1. Lock your cards away. Don't close your accounts yet, but stop using them. If your credit rating has been damaged, you may have trouble getting new cards. Your immediate objective is to repair your credit rating and to get out of debt.

2. Figure out where you stand. Finding the truth is necessary to help measure success. A credit record is controlled by creditors and the reporting bureaus and many reports contain errors. Clear those up first by writing to the credit bureau describing the errors in the report and providing any receipts or other back up materials. Be sure to send your correspondence by certified mail with a return receipt requested. This will provide a paper trail and help in the follow up.

3. Devise a plan and begin paying your bills on time. That means you pay at least the minimum balance on each bill within 30 days. If you cannot do that, consider credit counseling with a reputable credit counselor. If there is no way to pay the minimum on all debts, you may want to consider bankruptcy and a fresh start. Decide which course of action you will take and follow through.

4. Negotiate with creditors. Nine out of 10 creditors will renegotiate terms with you if you’re having trouble paying bills. Write a letter to your creditors describing your problem and requesting a reduced payment schedule. Then commit to your new schedule.

5. Add relevant information to your credit file. Creditors are not required to report information to a credit bureau. But you are permitted to add information that you think will help your rating. You are legally allowed to write a letter of up to 100 words concerning any credit dispute and the agency must provide it to any creditors who ask for information.

Next Page: How do I choose a credit counselor to assist in Credit Repair?

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