How to Restore Your Once Good Credit

Your once good credit may have been hammered in the recent recession as you endured job loss, a home foreclosure, medical bills or other problems that sent your credit score in a free fall. There are some things you can do to restore your credit and put it on the mend faster.

1. Set a base line — How low did your score fall? What is your score now? You can obtain your credit score for a nominal fee by visiting MyFico.com. That three-digit score will tell you much about where you stand now and what you need to work your way back up. If your score is below 598, then you’re in sub-prime territory. A score that is much lower means that virtually no lender will touch you. Obtain your credit score to establish your base line.

2. Pull your credit reports — Your credit reports tell lenders and everyone else who inquires about you many things. Trouble is, those reports aren’t always accurate. Visit AnnualCreditReport.com to obtain your three credit reports from Experian, Equifax and TransUnion. By law, you’re entitled to receive each report once annually for free. Review each report and make sure that the information about you is correct. That information includes your address, where you work, your current credit lines, your credit history and related information. If you find a mistake, then notify the respective credit bureau. They’ll have 30 days to make the correction otherwise the information must be expunged from your record. If you find several mistakes, then your credit score should begin to rise. Ask for new copies of your updated credit reports — these are free when errors are attributed to the credit agency.

3. Pay your bills on time — Wrecked credit or not, you still pay bills every month. That means your timely payments are working to help restore your credit. Bills for utilities including lights, gas, water, telephone and cable must be paid on time. Rent, a car payment, credit cards and other regular bills belong in that mix. Fall behind on your monthly payments and you’ll only undermine all of the other work that you’ve been doing to restore your credit.

4. Apply for a secured credit card — Maybe your credit has taken such a bad hit that you no longer have a credit card to your name. That isn’t necessarily a bad thing, but it can be a major inconvenience and cause you some hassles. One way to get around this problem and begin to repair your credit is to apply for a secured credit card. With this option, the banker’s risk is removed: if you want a $500 credit line, then you’ll have to fork over $500 that will be frozen funds. Once approved, then begin to use your card every month, avoiding making purchases that will go over your credit line, incurring further penalty and making your payments on time each month. Avoid running a balance and be prepared to pay related fees for this privilege.

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5. Seek a store card — It is true: people with bad credit can usually get a store credit card. That’s because retailers have looser credit requirements than the credit card networks such as Visa, MasterCard, Discover and American Express. Apply for one of these cards, make wise purchases and like a secured credit card, make your payments on time each month.

How fast will your credit rise? That is hard to say. There are many factors at work including your low credit score and previous credit problems. Regardless, your score should begin to rise as long as you practice wise credit management. You may also need to settle with a creditor if you have an outstanding and late balance. Work toward correctly outstanding problems and your once good credit will gradually return.

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