In order to rebuild bad credit, you need to take a two-pronged approach. You need to make sure every item on your credit report is accurate and then start building sound financial habits.
Clean Up Your Credit Report
First step to rebuild bad credit is to get a copy of your credit report and go over it with a fine tooth comb looking for any inaccuracies you can dispute with the credit reporting agencies.
The Fair Credit Reporting Act allows you to dispute items on your report that you deem inaccurate, so make the most of your rights and dispute those you feel are incorrect.
There is a sample dispute letter you can find on the website that’s highlighted below that you can copy and send to the credit agencies.
Develop Sound Financial Habits
Once you’ve dealt with your credit report, the next step to rebuild bad credit is to develop sound financial habits in your day to day life that will add points to your credit score.
Paying your bills on time is obvious, but it’s an important habit to develop as your payment history accounts for 35% of your credit score. That’s huge and just by being diligent and doing whatever you can to make sure payments are paid on time and not one day late, you can start turning your credit situation around.
Your recent bill paying activities add a lot of weight to having a good credit report so you really want to develop this sound financial habit if you are serious about improving your credit.
If you want to rebuild bad credit and you have credit cards, try to only use up to 50% of their credit limit. The amount of credit you have available also has an effect on your credit report, so do what you can to get these paid down to 50% of their limit as quickly as possible.