How to Repair a Credit Record

Outstanding debts, bankruptcy and late payments have a huge impact on your credit history. A good credit record takes the hassle out of applying for loans. People with good credit can usually walk into a lender's office and easily qualify for a loan. But if you have a negative credit report, your finance options are limited and you may get stuck with a bad loan.

• 1

  Figure out what needs repairing. Knowing where your credit stands is key to repairing a damaged credit record. Pull your credit report from Annual Credit Report.com and look for derogatory entries such as late payments or collection accounts.

• 2

  Keep accounts out of collections. Creditors will send unpaid accounts to collections, which reduces your credit rating. Prevent collection accounts and judgments by speaking with creditors and reworking payments.

• 3

  Stay below your credit limit. Repair your credit record and low credit rating by paying down your debt. Increase the amount of your payments and quit using credit to help eliminate outstanding balances. Credit card balances should not exceed 30 percent of your limit.

• 4

  Add positive information to your credit report. Pay off collections and charge-offs, and always send in timely payments to gradually increase your credit score. Creditors and lenders will report your debts as "paid" or "satisfied."

• 5

  Get back on track with credit counseling. If overwhelmed by debt and credit problems and creditors are unwilling to work with you, solicit the help of professional credit counselors to help get your credit and finances on track. Pick a nonprofit agency to avoid fees.