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Steps to Rebuild Your Credit - Rebuilding Credit, Increase Credit Score

Rebuild Your Credit By Using Our Easy to Follow Steps

Last Updated: April 4, 2016

The longer you live with bad credit, the more daunting the road back to good credit can feel. That's why it's important to break down the process of rebuilding your credit into manageable steps. You never want to try to do everything all at once but rather, take little steps and slowly chip away at all the negative items on your credit report. We want to make the process of rebuilding your credit as easy as possible, which is why we put together this article to show you the steps needed top make your credit repair process a success. Remember to be patient and have faith that, over time, you will see gradual, but certain, improvement in your credit score.

Monitor Your Credit Reports

You're entitled to one free report from each of the three major credit reporting agencies once per year. Make it a point to request your copies via AnnualCreditReport.com.

Look For Errors On Your Credit Reports

After you request your credit reports and you have a chance to look them over, make a point to see if there are any errors. Some errors may include:

Dispute Any and All Errors on Your Credit Reports

Send a certified letter to the appropriate credit reporting agency. It's important to dispute even the smallest of details, including a name misspelling or inaccurate mailing address, as this could suggest your identity is being confused with someone else.

Request a Validation of Old Debt

This refers to any account that is no longer being collected by the original creditor. When an account is sold to a collection agency, documentation supporting adequate proof of the debt doesn't always go with it. And the more times the account is sold, the thinner the proof. This is important because you are not legally obligated to pay a debt that the collector cannot prove you are are legally responsible for.

Try Negotiating A Settlement on Your Debt

See if you can settle for less than the amount owed, as well as removal of the negative listing from your reports (which they are not required to do, but it's worth a try). If you do reach a settlement, be sure to get it in writing!

Make Note of Dates When Negative Listings Should Fall Off Your Credit Reports

If these items do not fall off your reports within the specified time period(s), dispute it with the credit bureaus.

Apply For New Lines of Credit

You may be a little gun-shy about using credit again, but (after debt validation) it's the best way of rebuilding your credit score. Of course, you'll have to rely on options open to someone with less-than-stellar credit:

Use Your Credit Cards

The only way credit cards can boost your score is if you demonstrate the ability to responsibly use them. This is not say you should make unnecessary purchases just to use your credit. Rather, use your cards only for things you normally buy or pay for, like groceries or the phone bill. Just remember to never charge more than you can afford to pay off at the end of the month. The goal should always be to return the balance to zero so as to avoid interest charges and to keep your credit utilization ratio low.

Keep Your Credit Utilization Ratio Below 30 Percent

In other words, never use more than 30 percent of your total credit at one time. Actually, 10 to 25 percent is an ideal target range.

Keep Open Credit Accounts in Good Standing

This means making all your payments on time, be it credit cards, car payments, house payments, utility payments, medical bills, student loans, and other credit lines that get reported to the credit bureaus.

Monitor Your Credit Score

As you take steps toward rebuilding your credit, it's helpful to see how your actions are affecting your score. This not only informs where you may place emphasis in the credit rebuilding process, but it's also a great way to stay motivated.

Spend Less and Save More

To help ensure you always have the means to pay your bills on time, go through your budget, cut where you can, and start an emergency fund from which you can draw, need be.

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