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Reestablish Good Consumer Credit and Raise Your Credit Score

While there are a lot of Web sites and Internet ads that promise to “repair” or “fix” your credit report and credit score (for a fee, of course), the truth is that there is no quick fix to reestablishing good credit. There’s also no reason to pay someone to help you, as all of the necessary steps to repairing bad credit can be done with little to no money. Often, these “credit repair” sites either require a large fee to do something you can do on your own for free, or use fraudulent methods to repair your credit. If you have accurate negative information on your credit report, acknowledge the problem. If you are willing to work hard, and be patient, you can mend your credit.

The first step is to review your financials to determine how much you can afford to pay for each of your bills. Working with a nonprofit consumer credit counseling agency, or on your own, you should establish a working personal budget to use, taking into account all of your bills, your minimum payments, and incoming salary. Remember that you may need to cut back in some areas, but it’s important that you are able to make some payment for every one of your bills, each month.

Next, contact your creditors and discuss your situation with them. Using your personal budget, explain that you are unable to make the full payments. Commit to making a smaller, ongoing payment. In this situation, communicating with your creditors can help if you are dedicated to making regular payments. It’s important that you contact your creditors before your accounts are turned over to a collection agency. You may consider consolidating debt to lower interest accounts—this isn’t for everyone, so make sure you fully understand how debt consolidation works.

Finally, you’ll have to wait. Accurate negative information can only be removed with time. The federal Fair Credit Reporting Act (FCRA) states that Chapter 7 bankruptcy information can remain on your credit report for ten years while other accurate negative information can remain on your report for seven years. This time frame usually starts when the negative event (e.g., late payment, bankruptcy) occurred. There are some additional time frames for unpaid judgments and criminal convictions. Don’t be discouraged however; as you make payments and add positive information to your credit report, your creditworthiness can improve.  Current information is generally weighted more heavily than older information. In the meantime, opening a savings and/or checking account, as well as a secured credit card, can help you reestablish good credit.