Rebuilding Your Credit Record

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Chances are, you didn't get a negative credit history overnight, so it isn't likely you'll repair your credit record overnight. However, if you start to take some specific action steps now and take a proactive approach to dealing with this problem, you can rebuild your credit record and get back on track. 

Get your credit report and correct any errors. Start by contacting credit agencies to get a copy of your credit report. If there are errors on your credit report, use the sample letter on the previous page to contact the credit reporting agency and request that they investigate your claim.

 
 Develop payment plans. Contact your lenders to renegotiate payment plans.\

Contact the organizations below to opt out of receiving unsolicited offers for credit cards to avoid the temptation of applying for them. 

Mailing lists from three credit reporting agencies:

888-5OPTOUT (800-567-8688) 
Mail, telephone and e-mail preference services:

Direct Marketing Association

Mail Preference Service: 
www.dmaconsumers.org/cgi/offmailinglist 

Telephone Preference Service:
www.dmaconsumers.org/cgi/offtelephone 
Email Preference Service:
www.dmaconsumers.org/consumers/optoutform_ emps.shtml

Telemarketing calls:
www.donotcall.gov 
 Immediately stop purchasing with credit. Take your credit cards out of your wallet. Store them in a spot that is hard to reach, or even cut them up. 
 

Alert: Creating a Credit History

Some people prefer to pay cash for things and as a result they might not have a credit history.Use the following suggestions to build your credit history.

Apply for a small loan at the bank, thrift, or credit union where you have checking and savings accounts.

  • Apply for credit with a local store, such as a department store. They typically have a lower credit limit and a higher annual percentage rate (APR), but are generally more willing to extend credit to you. There is usually no fee for department store cards.
  • Ask a friend or relative with an established credit history to be a co-signer for you. A co-signer promises to repay the loan if you don't. The lender should report the payment information for both you and the co-signer to the credit reporting agencies.
  • Establish a nontraditional credit history. Create a history of your timely rent, phone, utility and other regular payments. Keep copies of your cancelled checks, money order receipts, and rent statements. These documents will show that you have a history of making regular and on-time payments.
  • Pay your bills on time. This will help establish a good credit history, so you can access credit in your name in the future.

 Consider consolidating debts. You may find it easier to make a single payment rather than several. You might also get a lower interest rate that will make it easier to keep up with payments. Remember that debt consolidation is not a cure-all. You have to learn to control your spending to avoid future debt.  

Don't expect miracles. Don't believe companies that promise to fix a poor credit rating quickly and painlessly for a fee. As long as it is accurate and timely, negative information cannot be removed from your credit record. The only way to improve a credit record is to let time pass and establish a record of on-time payment.

Contact a credit counseling organization. You can obtain referrals for organizations in your area that will work for your best interest through the National Foundation for Consumer Credit, www.nfcc.org, 800-388-2227. If you have decided to tackle your credit issues in an effort to qualify to buy a home, contact the NeighborWorks® organization nearest you by clicking on www.nw.org
 

Caution: Credit Repair Steer Clear Here! 

You see the ads in newspapers, on TV, and on the Internet. You hear them on the radio. You get flyers in the mail. You may even get calls from tele-marketers offering credit repair services. They all make the same claims: 

Credit problems? No problem! We can erase your bad credit 100% guaranteed. Create a new credit identity legally ...We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!

Do yourself a favor and save some money too. Don't believe these statements. They're just not true. Only time, a conscientious effort, and a plan for repaying your debt will improve your credit report.