Any number of things can contribute to a person’s bad credit: high balances on several credit cards, foreclosure on a home, a declaration of chapter 7 or chapter 13 bankruptcy, or a default on either a federal or private loan. While a bad credit score is disheartening (and can prevent individuals from obtaining credit in the immediate future), it is possible to repair bad credit history by adhering to the following guidelines and instructions.
Contact a Credit Counselor
One of the first steps to follow in order to repair bad credit history is to contact a non-profit credit-counseling agency. This can be especially useful if one of the causes of bad credit is related to credit card debt. Credit counselors can negotiate with credit card companies for lower monthly payments and lower finance charges by up to forty percent; sometimes, card companies will even agree to waive some of these charges so long as the cardholder continues to pay down the balance.
Pay Down Debt
Once an individual has contacted a credit counselor and worked to negotiate repayment of cards or other private loan debt, he or she should dedicate a significant portion of his or her budget to paying down these balances. To pay off debt in a timely fashion, it is generally recommended that individuals pay at least twice the minimum amount due, if possible. While this can seem daunting at first, particularly in the face of large amount of debt, it is one of the best ways to quickly and efficiently repair bad history.
Keep Credit Lines Open
Some people often panic when they see a low credit score, and immediately close their accounts, refusing to use a line of credit in the future. This, however, can actually do further damage to a person’s rating. The best way to repair bad history is to stop using current cards and cut them up (without closing the accounts), and work on paying down the balance to zero. When this is accomplished, a person’s report will then show a high available credit to debt ratio, which can drastically improve ratings.
Open a New Line of Credit
It may seem counterintuitive to open more lines of credit to repair a bad history—particularly if credit cards were to blame for financial troubles in the first place. However, this is one of the best ways to repair credit history, since good credit is reliant on a person’s ability to receive and then pay off all credit lines. Department store cards and gas cards are often the easiest lines of credit to obtain with bad credit scores, as are “secured” credit cards, which are issued upon receipt of collateral from the cardholder.
Unfortunately, many companies and individuals are out to profit from the financial misfortune of others. Those looking to repair bad credit history should be wary of any offers that claim to fix bad credit “quickly” or immediately.” These companies will often charge high fees for their services and their promises are misleading, since building this history history does take some time. Simply focusing on paying down debt will be a much safer way to achieve a better overall score.