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7 Steps to Fix Bad Credit

Raise your hand if you were one of the millions of people who promised yourself you'd only use your credit cards for an emergency. Don’t leave me hanging. When I got my credit card, I was sure I would only use my card for gas and other essentials. But nothing over 10% of my card limit. That quickly turned for the worst. No one takes on a line of credit with the intent of falling into debt. It happens more often than not, and it is a downhill spiral from that point on until you fix your credit.

Here are a few things you can do today to repair your credit:

1. Make sure you know who is looking at your credit report and why. This way you will know how many inquiries have been made and you can dispute any unnecessary or illegal inquiries into your report.

2. Know the difference between hard and soft inquiries. Soft inquiries will not affect your credit score whereas hard inquiries do. Make sure you know exactly how many hard inquiries are on your account at any given time. If you need to apply for credit ask the lender if the do hard pulls or soft pulls.

3. Whenever you find a mistake on your credit report, it is important to contact the creditor as well as the credit bureau when you are trying to rectify that mistake. This can help any future problems by preventing that creditor from making the same mistake twice, so you won't have to go through it again.

4. To avoid hurting your credit when you cannot afford to pay all your bills for the month, prioritize. A single late payment towards a medical bill, a payday loan, or even your electric bill will not hurt your credit in the way that a late credit card payment will. While those late fees may hurt, at least they will not damage your credit score. I usually would list all my bills from most important to least important. And the most important ones I would pay first or arrange to pay before a certain time.

5. To avoid being harassed by creditors, learn your rights fast. Some collection agencies have been known to lie or engage in illegal techniques to get paid. Read up on the collection agency laws in your area as well as the Fair Debt Collection Practices Act. A little knowledge will give you the ammunition you need to shut down harassment.

6. To increase your credit score, keep the balance owed on your credit cards at less than 10% of the card's total limit. The way you utilize your credit is something that credit bureaus consider when evaluating your credit, and a little restraint will go a long way to show that you use your credit responsibly.

7. While it may be tempting to agree to instant payments to creditors over the phone, paying by paper check can give you absolute proof of payment should the need arise. Keep canceled checks attached to all pertinent bills and paperwork or be sure to make copies of checks when they are available online.

At the end of the day, getting out of a bad credit situation is all about arming yourself with the proper information to do so. The net is riddled with misinformation and half-truths so heed this information wisely and use it to pull yourself up by the bootstraps so you can experience a life free of bad credit.

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