How to Rebuild Your Credit

Rebuilding your credit can take several months or years. The length of time it takes depends partly on how badly your credit needs repair. It is easier to recover from a few late payments than to recover from foreclosure or bankruptcy. Debt or foreclosure should drop off of your credit report seven years after the last activity on the accounts; bankruptcy can stay on for up to ten years.

In order to complete this project you will need:

• List of your old debts
• Credit report

1. Catch up on any late payments that you have. If you are still behind on payments, it is important to get organized with all of your current bills before you worry about old debts. Your house payment is the most important payment to make each month.
2. Begin to pay off the old debts that you still owe. You can settle these debts, but the credit report will say "Settled" instead of "Paid In Full." However, "Settled" is a lot better than having outstanding debts with no payments for several years on your credit report.
   
3. Establish a positive payment history. Apply for a secured credit card and and begin making monthly payments on time. A secured credit card is a great way to slowly begin rebuilding your credit score. Staying current on all of the accounts will also help to establish a new pattern of credit payments.
   
4. Pay down the balances on your credit cards. When your credit cards are maxed out, it has a negative effect on your credit score. You want to keep a balance of credit and available credit on your score.
5. Leave your oldest credit accounts open. If you choose to close credit card accounts, leave your oldest accounts open. The longevity of the account affects your credit score. The longer you have had an account in good standing the higher your score will be.

Warnings:

• Once you have rebuilt your credit, make sure that you continue to make payments on time.
• Be sure that you do not borrow too much money or rely on your credit cards too often, so you can control your credit score and your debt payments.