Repairing bad or impaired credit is a long and difficult process, and done right, it may take a year or more depending on your situation.
The first and most obvious step in repairing bad credit is to not incur any more of it. Take a long, hard look at your spending, and revise it so that you are able to meet your current obligations and have some money left over. This isn’t an easy thing to do, and it may require hard and uncomfortable choices to be made.
Secondly, avoid, at least while you’re in the process of credit repair, taking out additional loans and credit cards. You may be able to qualify for credit, but it’s going to be on stiff terms, your interest rate will be high and you will be subject to steep fees. Wait until your credit has been repaired and you qualify for better rates.
Some people are able to save money by transferring credit card balances to lower-interest cards, but if your credit is impaired, you will not qualify for these low interest offers. After your repair has been complete however, you can use this strategy to save additional money.
Realize that credit reporting agencies make mistakes. Lots of mistakes. Obtain copies of your credit report from all three credit reporting agencies, and review them for errors. There may well be entries in your report that are not accurate or out of date. You can contest any entry in writing, and if the creditor cannot prove that it is accurate, the agency must delete the item from your report.
Also, when you are behind, ignore that old-fashioned myth that says if you send in a token amount every month, it keeps your creditors off your back. It doesn’t. It’s hard to place a phone call to people you owe money to, but this is the best strategy if you are in a tight spot. Call regularly, document everything that is said, and get the name of the people you speak with. Some creditors may have forbearance plans that let you skip a payment and put it onto the end of your obligation period, and still others may let you refinance the amount you owe to yield lower monthly payments. To be sure, some will just want their money, and they will want it now, no exceptions–but you don’t know until you ask.
Use caution when using the services of a credit counselor or debt consolidator. These services can be very useful, but they are offered by private companies, and should be checked out as you would any financial services provider.