Tackling Your Credit Repair: You Can Do It!

If you find yourself with bad credit, take heart--you're not alone, and the problem is not insurmountable. Credit repair takes some planning and discipline, as well as some time, but you can put yourself back on the road to respectable credit with a few simple steps.

The first step toward credit repair is to gather all the information about your bills, debts, and finances so you can create an accurate picture of your current financial situation. Create a detailed list of all your obligations (credit cards, loans, mortgages, bills, and debts), noting for each item (1) how much you owe, (2) the interest rate on unpaid principle, and (3) the fees or charges associated with late payments. Remember that bad credit scores stem from late and overdue payments, as well as high debt-to-income ratios, so you'll want to focus your efforts not only on paying down existing debt, but also restructuring that debt so you can manage to make "on-time" payments while doing so.

A good place to start with credit repair is with by addressing your credit-card debt, because credit cards generally have the highest interest rates, meaning that you're spending a lot of money (on interest, and maybe late-fees) without materially reducing your actual debt. Additionally, if you have a large number of "small" debts on credit cards, and aren't able to keep up with timely payments on the various cards, your bad credit score might be taking an further hit because of numerous late payments on those various cards. To address both of these issues, shop around for a credit card with a lower interest rate (or even a lower introductory interest rate, and/or a lower interest rate for balance-transfers) and consolidate your various credit cards into a single debt (and single monthly payment). Although this initial step doesn't eliminate debt, it streamlines your finances considerably. Now your primary goal is to pay down this high-interest credit-card debt. (Larger, lower-interest loans like mortgage and car payments are a lower priority; keep paying the minimums and focus your energy on the credit card.) This also means you should stop using the credit card.

Credit repair takes some discipline and sacrifice, and your next step is to see where you can trim your expenditures for the time it takes to pay down your credit-card debt. Make a game of it if that helps: how much money can you throw at this credit card every month to get the satisfaction of seeing that particular debt dwindle (as well as the satisfaction of knowing that your bad credit is on its way to improving)? Your expenditure-cuts don't have to be permanent sacrifices, but for the time being, can you abstain from shopping and services that aren't strictly necessary? Consider putting cable services on hold, avoid the mall and eating out, and remind yourself that each expenditure you avoid means that much more debt eliminated when you send that money to the credit-card company instead.