How can I rebuild my credit?

Question

I have a couple of credit card charge offs. How can I start to rebuild my credit? should I make a settlement on those credit cards, or should I pay off the entire balance? How will each affect my score? How do I get those inquiries off of my credit report that drag my score down?

Answer 1

Step One
Correct all inaccuracies on your Credit Report.

Go through your credit reports very carefully. Especially look for; Late payments, charge-offs, collections or other negative items that aren't yours, Accounts listed as "settled," "paid derogatory," "paid charge-off" or anything other than "current" or "paid as agreed" if you paid on time and in full, Accounts that are still listed as unpaid that were included in a bankruptcy, Negative items older than seven years (10 in the case of bankruptcy) that should have automatically fallen off your report (you must be careful with this last one, because sometimes scores actually go down when bad items fall off your report. It's a quirk in the FICO credit-scoring software, and the potential effect of eliminating old negative items is difficult to predict in advance). Also make sure you don’t have duplicate collection notices listed. For example; if you have an account that has gone to collections, the original creditor may list the debt, as well as the collection agency. Any duplicates must be removed!

Step Two
Make sure that your proper credit lines are posted on your Credit Reports.

Often, in an effort to make you less desirable to their competitors, some creditors will not post your proper credit line. Showing less available credit can negatively impact your credit score. If you see this happening on your credit report, you have a right to complain and bring this to their attention. If you have bankruptcies that should be showing a zero balance…make sure they show a zero balance! Very often the creditor will not report a “bankruptcy charge-off” as a zero balance until it’s been disputed.

Step Three
If you have any negative marks on your credit report, negotiate with the creditor/lender to remove it.

If you are a long time customer and it’s something simple like a one-time late payment, a creditor will often wipe it away to keep you as a loyal customer. If you have a serious negative mark (such as a long overdue bill that has gone to collections), always negotiate a payment in exchange for removal of the negative item. Always make sure you have this agreement with them in writing. Do not pay off a bill that has gone to collections unless the creditor agrees in writing that they will remove the derogatory item from your credit report. This is important; when speaking with the creditor or collection agency about a debt that has gone to collections, do not admit that the debt is yours. Admission of debt can restart the statute of limitations, and may enable the creditor to sue you. You are also less likely to be able to negotiate a letter of deletion if you admit that this debt is yours. Simply say “I’m calling about account number ________” instead of “I’m calling about my past due debt.”

Step Four
Pay all credit cards and any revolving credit down to below 30% of the available credit line.

The scoring system wants to make sure you aren’t overextended, but at the same time, they want to see that you do indeed use your credit. 30% of the available credit line seems to be the magic “balance vs. credit line” ratio to have. For example; if you have a Credit Card with a $10,000 credit line, make sure that never more than $3000 (even if you pay your account off in full each month). If your balances are higher than 30% of the available credit line, pay them down. Here is another thing you can try; ask your long time creditors if they will raise your Credit Line without checking your FICO score or your Credit Report. Tell them that you’re shopping for a house and you can’t afford to have any hits on your credit report. Many will not but some will.

Step Five
Do not close your old credit card accounts.

Old established accounts show your history, and tell about your stability and paying habits. If you have old credit card accounts that you want to stop using, just cut up the cards or keep them in a drawer, but keep the accounts open.

Step Six
Avoid applying for new credit.

Each time you apply for new credit, your credit report gets checked. New credit cards will not help your credit score and a credit account less than one year old may hurt your credit score. Use your cards and credit as little as possible until the next credit scoring.


Step Seven
Have at least three revolving credit lines and one active (or paid) installment loan listed on your Credit Report.

The scoring system wants to see that you maintain a variety of credit accounts. It also wants to see that you have 3 revolving credit lines. If you do not have three active credit cards, you might want to open some (but keep in mind that if you do, you will need to wait some time before rescoring). If you have poor credit and are not approved for a typical credit card, you might want to set up a “secured credit card” account. This means that you will have to make a deposit that is equal or more than your limit, which guarantees the bank that you will repay the loan. It’s an excellent way to establish credit. Examples of an installment loan would be a car loan, or it could be for furniture or a major appliance. In addition to the above, having a mortgage listed will bring your score even higher.

Answer 2

You rebuild your credit by paying your bills on time, in full. Make the minimum payment if that's all you can, but pay it. Pay more if you can swing it. Figure out what you can do without - a stop at Starbuck's on the way to work, the beer for the weekend, the smokes, the DVD rental... Think really, really hard about finding a 2nd job evenings or weekends, and put EVERY SINGLE NICKEL YOU EARN THERE towards the credit card bills. Yeah, you won't have any free time, but without cash or credit, what are you going to do anyway?

It took time to get into debt, it takes time to get out, too. But paying it off not only gives you a better credit rating - it gives you self esteem. And there's no way to put a price on that.

Answer 3

You should make a settlement agreement. Most companies will allow you to pay pennies on the dollar so the debt is paid. Negotiate with them it is worth it. The inquiries on your credit report will be available to potential lenders for up to 10 years. The best way to rebuild your credit is to find a co-signer that is willing to help you or play the waiting game. After about 1 year from your charge off date if you are making payments or have paid off your previous debt look for a credit card that is designed to rebuild your credit. Capital One has a good program, small limit, higher APR but unsecured. Good Luck

Answer 4

Well I asked the same thing 9 years ago and within two years I bought my first house with my great new credit. Here is how it is done; first as it was explained to me that credit leaders want one thing: constancy. Meaning they would like you to pay each month the same time the same amount. I had terrible credit I got this junk mail about get credit now with our new card and a $200 limit. So I would charge it up and pay the $10 they required each month, this is the most important step don't pay off the full amount. After 6 months your score will go up guaranteed. After 18 months dump the card and get a better one.

Answer 5

Credit counselors can even help you with strategies to eliminate credit card debt on your own. If you are really feeling distressed and do not want to do the things on your own, they may even offer you a Credit card debt reduction program. This program allows them to take care of your financial problems. They negotiate with your creditors on your behalf and persuade them to substantially reduce the interest rates and merge all the monthly payments into one single consolidated monthly payment. The credit counselors also negotiate with your creditors and persuade them to write off the penalties and other charges, if there are any. This way, the credit card debt consolidation program as suggested by your credit counselor not only helps put your finances back on track, but also save you from the hassle of dealing with your creditors or collection calls.

Overall, a right Credit card debt reduction programs can allow you to get back on your feet while slowly rebuilding your credit history. Your late payments and/or high balances can be replaced with a history of on-time payments and diminishing debt balances. However, there are certain factors that you must keep in your mind if you want to get the full benefit of the credit card debt consolidation programs. It is important for you to understand that it is only if you make the consolidated monthly payments on time that can help rebuild your credit score. If you still default on the payments, it can make the things worse for you. So, be prudent and act smart. Read more about it at: http://www.credit-card-gallery.com/credit_card_debt_consolidate.html

Answer 6

The first listed link has some very good tips on raising your credit score. It's important to keep the balances low on your cards. Pay off one card at a time, making sure to pay at least the minimum balance on the others. In the long run, this will be less costly to you.

Disputing certain items on your credit report can help raise your score. "The FCRA dictates that every person has the right to dispute the accuracy or validity of any item on their credit report with the three credit reporting bureaus (Equifax, Experian, and Transunion)." The second link can tell you just how to go about doing that.

Answer 7

Credit cards do little to help your credit but can have huge negative impacts on it. Start using cash for most of your purchases (will tend to spend less) and try to get a bank loan for the balance of your credit cards. These types of loans help your credit better than credit cards do. Keep 1 or 2 credit cards open for major purchases and emergencies.

Answer 8

It starts with YOU...YOU decide to pay on time and fix your spending habits. Here's the best advice I can give you. Go to http://creditboards.com
and learn everything there is to know about credit and how it works..read until your eyes bleed, 95% of people don't have a clue how credit works...be determined to fix your credit once and for all...listen YOU can do this and there is a way

Answer 9

I think u should call them and settle or pay the balance off and any other bills u have pay them off each month.. Never be late and this will help u in the long run..

and for the inquiries u can't get them removed, they last up to 2 years and then they are removed..

Answer 10

spend less than you earn = Savings = better credit.