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Home > Financial Resource Center Home > Personal Debt Consolidation > How to Start Rebuilding Your Credit

It seems like there are all sorts of people offering to "fix" your credit for you. While a quick fix sounds tempting, fixing your credit needs time and patience.

With the sluggish economy, many people have accumulated high interest debt and have done major damage to their creditworthiness. There are plenty of shady companies just waiting to pounce promising that they can purchase a good credit rating. Don't believe them!

No one can "fix" a bad credit rating and anyone who promises that they can is trying to scam your money. Anything they can do quickly to repair only works if the information in your credit file is inaccurate. If that is the case, there is nothing they can do for you that you can't do yourself for free.

These are the three main things that can negatively affect your credit rating:

  1. Defaulted debts — This includes either debts unpaid or sent to a collection agency, including credit cards, auto loans, student loans and medical bills
  2. Slow payment history — Paying 30, 60 or 90+ days late can impact your credit
  3. Debt to income ratio — This is a comparison of the amount of debt carried and one's ability to make the monthly payments. If there is too much debt and not enough money to make the payments, it is a strike on the credit report.

The only way to correct a bad credit rating is to change the behavior that resulted in a bad credit rating and then be patient. By paying all your bills on time and keeping your debt level low, your credit score will gradually improve. Take these steps to begin rebuilding your credit rating:

  • Buy things only after the bills are paid and use cash.
  • Make the minimum monthly payments (at the very least) on time. Every time you are just a day or two late, it is reported to the credit bureaus and becomes a part of your credit record.
  • Don't take on any new debt. If you are overextended, this will be another strike on your credit report.

This article was submitted by the Institute of Consumer Financial Education, whose website provides financial education for all age groups with a special section devoted to teaching children about money.