How to Reestablish Credit

Depending on how serious your past and present credit problems are, it may take time and patience to establish good credit.

1. Check credit report
   
   Reviewing a copy of your credit report will give you a full understanding of exactly where you stand. It is important to review your report to make sure that the information is accurate. There's a chance that your credit report lists debts that don't belong to you. It's not unheard of for credit files to be mixed up, especially for people who have common names.
   
   
2. Check credit score
   Your credit history is summed up in a number known as a credit score. In general, your score is based on recent credit activity, late payments, how many times you have applied for credit and public actions you have been involved in, such as lawsuits, liens, foreclosures or bankruptcies.
   
   When you check your credit score, you'll receive up to five "score reason codes" These score reasons will tell you how you can improve your credit score.
   
   
3. Dispute
   You have the right to dispute inaccurate information. If you find incorrect information on your credit report, fill out the dispute form provided by the credit reporting bureau or write a letter to the bureau explaining your dispute.
   
   By law, the credit bureau has approximately 30 days to investigate and respond to your dispute. You should receive a written report on the results of the investigation. If your dispute results in a change to your credit report, you'll also get a free copy of your report with corrections
   
   However, correct negative information can remain in your credit report for two to seven years, bankruptcies up to ten years.
   
   
4. Get credit
   To rebuild credit, apply for a credit card or small loan from your bank, credit union or a local department store.
   
   Getting a secured credit card is one of the easiest ways to re-establish damaged credit. Many secured card companies will accept people who have even gone through a bankruptcy more than six months ago, as long as there have been no late payments or other negative credit information reported since the bankruptcy was settled.
   
   A secured credit card is a bank credit card that is backed by money you deposit and keep in a bank account. If you don't pay off your credit card bill, the money in your account will be used to cover that debt. Even people with poor credit may be able to get a secured Visa or MasterCard. Secured credit cards can help you repair your credit. You will probably qualify for a secured credit card if all your bills are paid and you have had no bad marks on your credit for at least six months.
   
   
5. Keep using credit and keep it in good standing
   Keep your existing credit accounts in good standing. You can repair your credit by improving the way you handle existing accounts, as well as by obtaining new credit. In general, pay more than the minimum payment - but, if you are in financial trouble, at least pay what the creditor asks for on a regular basis while you work on improving your finances. However, even paying $20 more per month will shorten the payoff period considerably.
   
   
6. Pay all your bills on time.
   When you are delayed or delinquent in a payment, late fees are charged, more interest accrues and your credit health is negatively affected.
   

   Contact your card issuer immediately if you were unable to pay your bills on time, or if you have found an error in a bill. Be sure to make any complaints, and get corrections, in writing.

7. Avoid unnecessary inquiries.
   Any time you authorize a creditor or other business to check your credit report, an inquiry is added to your report. If you have a large number of inquiries in a short amount of time, creditors may infer that you are either applying for too much credit because of financial difficulties or taking on more debt than you can repay.