The first step to repairing credit damage is by ordering a copy of your credit report from the three major credit bureaus, Experian, Equifax, and TransUnion at www.annualcreditreport.com. Review your credit reports carefully checking all information for accuracy such as: name, address, phone number, SSN, date of birth, current and previous addresses, accounts, account numbers, open and closed dates, status of the account, amount owed, and payment history.
Once you have reviewed your credit report determine if you have any past due accounts. If you have bad credit due to the loss of a job, health issues, family issues or a disability let the creditor know right away. Call the creditor to setup a payment plan to pay the debt. Determine the monthly amount you can afford, but don't let the creditor determine the amount for you.
If you find errors on your credit report write a letter to the credit bureau that is reporting the error or request an investigation by disputing the information online at the credit bureau's website. Provide any supporting documentation to prove your claim. The credit bureau will respond to your letter within 30 days from the day of receipt. Keep copies of all correspondence sent and received in the event you need to reference it in the future. If you do not receive a response follow-up with a letter to the credit bureau to verify the updates were made.
- Establish Credit. Open a department store credit card. They usually have the highest interest rates but provide easier approval than bank credit cards. Buy something small and pay the balance in full each month. You can also open a secured credit card account. Ensure the account is reported on your credit report. Get a secured card with low fees and a low interest rate.
- Pay down debt. Keep balances at 20% or less of the credit limit. Having credit cards maxed out or close to the limit decreases your credit score. Pay the smallest bills first then work towards paying the larger bills.
- Get current. Pay late accounts which greatly lower your credit score such as bankruptcy, judgments, tax liens, foreclosures, repossessions and collection accounts. Ask creditors to remove the accounts from your credit report after the account is paid in full to help increase your credit score.
- Closing accounts. Don't close accounts that have been open for 2 years or more and don't close accounts that are in good standing. Closing accounts can decrease your credit score.
- Negotiate. Ask creditors to settle the account for 50% of the total amount owed. In exchange for payment ask the creditor to remove the account from your credit report and request a confirmation letter stating the account will be removed prior to making a payment. If the creditor refuses ask the creditor to report the account as “paid” or “paid in full”.