How to Rebuild Bad Credit

Rebuilding bad credit should be a high priotity to those who have endured financial hardships which resulted in bad credit. Credit affects your rent, insurance, job offers, and interest rates on car loans and mortgages. Here are some suggestions on how to rebuild bad credit.

Obtain your free credit report

The first place to start is to obtain your credit report and review it carefully. Reviewing your credit reports will give you a complete picture of your payment history, lawsuits, arrests, and bankruptcy filing. According to Forbes, 70% of all credit reports contain errors. Correcting these errors will help improve your credit rating.

By law, you are entitled to a free credit report from each credit bureau (Equifax, Experian, and TransUnion) each calendar year. You may call 877-322-8228 or visit to get your free reports.

You may receive all three reports at once or you can request each one every four months to cover the entire year. By spreading out the reports, throughout the year, you can make sure all information is up-to-date and you can catch identity theft sooner.

You are also eligible for a free credit report if you:

  • become unemployed and intend to look for employment in the next sixty days
  • are receiving welfare benefits
  • if your credit report contains inaccuracies due to fraud or identity theft
  • if you receive a letter declining credit, employment or insurance

Dispute and correct errors on your credit report

If you find errors in your credit report, you need to dispute it by sending a dispute letter by certified mail with a return receipt to writing with the credit report bureau and the information provider. Upon receipt of your dispute letter, the credit bureau has thirty days to investigate the error in question. If the error is valid, you can request that your dispute letter be included in your file.

If the error is invalid, request that a letter stating that a correction has been made be sent to those who have received your report in the last six months; two years if a letter was sent regarding employment. The information provider must request that the credit bureau delete or update the error. For a sample dispute letter may be found on the Federal Trade Commission website.

Payments: Get current and stay current
A quick way to rebuild your credit and to increase your credit score by 35% is to pay your bills on time. Since payment history is the main factor contributing to a good credit score, getting current and staying current with your payments is a must.

Consider the following options to help you make payments on time:

  • use your bank’s bill pay service (it is usually free)
  • have your payment deducted automatically from your bank account
  • set up payment reminders with your creditor

If a late payment is unavoidable, contact your creditor and request forgiveness. Also, some companies will allow a five day grace period. Payments made within the grace period are not considered late.

Predatory Lenders

As a last resort, you may need to borrow money to pay bills in a timely manner. The following predatory lenders should be considered as a last resort. They target credit-impaired borrowers and charge them high fees to borrow money. These lenders offer the following:

If possible, consider these alternatives first:

  • Emergency community, federal or state assistance
  • Credit card cash advance
  • Consumer loan

Build and Work a Budget

Determine your income and expenses and what needs to be paid and when. A budget will not only keep you financially organized but will show you what expenses can be reduced or eliminated. For instance, you may notice that your cable bill can be eliminated by watching free antenna television instead. Visit and download their easy to use budget template.

These steps can have a great impact on your credit rating. Stay current and up-to-date on the contents of your credit report and be diligent about the accuracy of its contents. Build and maintain a budget to stay financially organized and prepared for upcoming payments. Always pay your bills on time and if you need to borrow money to make the payments, choose predatory lenders as a last resort.

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