How can I repair my credit?

Many people start off their financial lives "flying by the seat of their pants."  While not necessarily anyone's fault, this approach leads to many consumers getting in over their heads when it comes to credit and debt.  When this happens, the consumer's credit score suffers and their financial capability may be crippled for years.

If you have found yourself in a position where past poor decisions or unforeseeable circumstances led to a deterioration of your credit score, here are some tips to help you fix the dings on you credit and ensure the best for your financial future.

1. Make sure you have a consistent account in good standing at your favorite financial institution.  Savings, checking, and other such accounts will not appear on your credit report, but you may be asked to provide account information when applying for credit. Also, having an ongoing, positive relationship with a financial institution may sway the odds in your favor when you apply for a loan at that institution.

2. Try applying for a secured credit card. Most financial institutions will offer some variation of a secured card where you offer up a sum of money as collateral and, in return, they give you a credit card with a limit equal to your collateral.  They feel safe because they've got your guarantee (in the form of your money) that you'll pay back whatever you owe and, you benefit as you use the card responsibly and see your credit score starting to improve.

3. As you begin to use a credit card for purchases, be certain to pay your monthly payment on time each month.  If possible, pay off the entire balance every single month.  To make sure you can pay off the balance, consider keeping a record of your credit purchases, just like you would a transaction register for your checking account.  If you can't pay off the entire balance, be sure to pay at least the minimum payment, if not more, each month.  Paying more than the minimum amount due (or the entire balance) will not only help to improve your credit score but it will save you money on interest charges, as well.

4. You might want to apply for a secured loan from your financial institution.  Like the secured credit card, this can be secured by the money you have on deposit or, sometimes by stock shares that you own, or in the case of an auto loan, the car itself.

5. If you do not have collateral that would allow you to get a secured loan, you can ask a friend or relative with good credit to co-sign on a loan with you.  Keep in mind that a co-signer may become financially liable for any monies owed and, as such, some friends and family members may be uncomfortable mixing the personal relationship with a financial responsibility.

6. Be sure to keep your balances at a manageable level and always pay on time.  Utilizing your credit responsibly shows that you can use it, without abusing it.

7. If you are denied credit, find out why.  It could be your income, job, or credit history.  Whatever the reason, you can only work on making it better if you know what that reason is.

8. Request a free copy of your credit report.  Be sure to check it for accuracy and report any corrections that need to be made.  Corrections to inaccurate information can be made free of charge.  However, accurate information that points to negative payment behaviors will generally remain on your credit report for a period of seven years (bankruptcies, up to ten years).

9. Unfortunately, there are no quick fixes for bad credit.  It takes time to build all good things, including a solid credit history.