How to repair credit – a step by step guide
How to improve your credit score
- Obtain recent copies of your credit reports and decide if you are up to the task of slowly paying everybody off, or would prefer to start over at the risk of having a very low score for some time to come.
- This requires a frank assessment of what you want to save from the wreckage, and whether you can save it. Even if you do not opt for a bankruptcy proceeding, they can be imposed involuntarily under certain circumstances by your creditors. If you own a home, you should do everything possible to retain control of this asset, even at the risk of losing almost everything else.
- Credit is rebuilt in much the same way as it was originally created by having open lines of credit that show monthly activity. If you can hunker down and keep paying, you should do this, but only if you can get back to paying on time. This does the least damage to your credit report, and heals it the fastest of all possible scenarios. The downside is that it is the most financially expensive process to go through.
- If you end up filing for a Chapter 7 bankruptcy, the procedure moves very swiftly and will soon have you free to start over. Do so by exempting one of your current credit lines from the proceedings (and paying it off), or by opening a secured credit card account that begins to add positive entries to your credit record.
- Learn from your experience, however painful it might be. As you get new lines open, make the payments on time without fail. Keep your balances low (under 25% of the total line of credit). You might think that creditors like people who use their products to the max, and you would be mistaken. Keep the number of accounts small and diversified. A credit card, a car loan, and a revolving charge account are scored more highly than 3 credit cards, or 3 car loans, or 3 revolving charge accounts.
