Rebuilding Your Credit     Rebuilding or reestablishing credit is a process that many individuals will go through. The first thing that you needs to understand about the process is how credit works. For that we would recommend reviewing "Credit Reports & Credit Scores". The second thing that a consumer needs to understand about rebuilding credit that has been damaged is that it takes time. Credit is based on factual information that is kept in a consumer's Credit Report, if the information is accurate then it cannot be eliminated and will remain on your credit report for seven years.     After reading our section on "Credit Reports" you'll have learned that there are several different categories of information they contain. Those sections include; Public Records, Account Information, Demographic Information, and Inquiries. Each section includes relevant information to an individual's credit worthiness. If there is derogatory information in any of these categories then it will affect your overall Credit Score.     As you've most likely learned by now if you didn't know previously, Credit Scores are how a consumer's credit risk or credit worthiness is rated. So when someone says, "they want to improve their credit", they're really talking about trying to improve their credit score. This is basically improving the quality of information in their credit file.     It is important to understand the difference between improving your credit score and rebuilding credit. One consumer is looking at improving existing positive information. The other is looking at clearing away the negative and replacing it with something positive. The direction is similar for both for individuals, so some of the methods are the same. Step one: Obtain a copy of your credit report.     The first thing in rebuliding credit is to assess the damage that has been done. You may find it's not a bad as you thought, and you might find that it is. In either case it is what is and that is what you have to work with. When you obtain your Credit Report there are several different options, it's best to obtain a copy that includes a dispute form. Step two: Evaluate     Credit Reporting Agencies are required to maintain accurate information, and under the same guidelines they must remove inaccurate information. When you receive your Report, review it thoroughly, and dispute any inaccurate information.     Once the Credit Bureau receives the dispute form they will forward it to the institution that has reported the information. They then have 30 days to provide proof that the debt is legitimate. If the institution does not provide a confirmation as to the validity of the debt, then it must be removed from your credit report.     Once you've reviewed your Credit Report you can see exactly what you're facing and properly gauge the amount of work that you'll need to do. Don't give up! Rebuilding credit takes time. This cannot be done quickly so consumers should not be discouraged if it looks like a lot to accomplish. Step three: Prioritize     Now that all of the facts are there you need to determine where to start. In most cases for individuals who are looking to rebuild credit, there are past due bills that need to be paid. These will not simply go away and anyone who is serious about rebuilding credit, needs to address this.    For any accounts that are current, the first priority is to make sure they stay that way. They will be your saving grace in this process. The longer your payment history on current accounts the better your credit score will be.     Once the open accounts are current and stable as far as the monthly payments, it's time to look at the old debts. Accurate information will stay on your credit report for seven years from the date of last activity. It is important to get these accounts paid off as quickly as possible, without falling behind on current accounts. Step four: Action     Now is the time for consumers to take action on the information that they have obtained. You can now see what is owed and what the priorities are to be paid. The next thing to do is start paying them. In order to do this effectively, you'll need a budget. If you haven't created a budget yet, visit our section on basics of budgeting and create a budget to work with. Make sure that you're using the income you have appriately and you're not overextending yourself.    You’ll want to send as much as you can to the past due debts or collection accounts. You don't want to worry about sending additional funds to your current accounts. They will be helping your credit just by making on-time payments. After an account has been closed and when it is paid in full, that begins the date of last activity on the account. This starts the clock on when the information will be removed from your credit report. Keep in mind that as time passes, the significance of those accounts will become lessened due to the time frame since it occurred.    For accounts that are past due but still open, contact the creditors and try to make arrangements to bring the accounts up to date. Most creditors will have some form of program that they offer to help consumers who have fallen behind. If your creditors are not willing to offer any programs to you, consider a legitimate Credit Counseling Agency. They will be able to assist you in a Debt Management Program.     There is nothing that can help to improve your credit score other than time and diligence. You need to maintain the payments on your accounts each month and get rid of the negative information on your credit report. Pay off old balances and only open accounts, as you need them. If you manage the accounts that you need properly, you will present yourself as a good credit risk.     If at the time of starting your credit repair you have no open revolving accounts you will want to look into opening some after you have paid off any old debts. If you've had a bad credit record and you're applying for new credit, you may have a hard time due to the previous delinquencies. Due to this it might be best to start the application process with a secured card. A secured card will require a security deposit, but due to that a lender will be more likely to consider you. By applying for accounts such as this you increase the possibility for them to approve the application. This will give you the open account on your credit record that you need and minimize the number of inquiries on your credit report.