Getty Images A Step-by-Step Guide to Repairing Your Bad Credit Share Flip Pin Email By LaToya Irby Updated July 25, 2017 It doesn't take much to get bad credit. You can ruin your credit score before you even realize you have one, or before you realize how important it is to have a good credit score.Your credit score is a reflection of how you've handled your financial obligations. It's based on information that's been reported to credit bureaus by companies, like credit card issuers and lenders, you have financial accounts with. If you've paid your bills on time and managed your accounts wisely, you'll have a good credit score. But, if you've made some mistakes — like not paying on time or not paying at all — you'll end up with bad credit.If you have bad credit, then you know how tough it can be. Bad credit makes many things difficult, impossible, or more expensive. We all know that banks check credit scores before they give you a credit card or a loan. That means the process of buying a house or car is more difficult when you have bad credit. Even renting an apartment is tough without a good credit score. Insurance companies often charge a higher rate for drivers that have bad credit scores. Utility service providers check your credit to decide whether you should pay a security deposit. As years go by, the list of companies who check your credit will probably grow instead of shrink.Why Pursue Credit Repair?No matter how bad your credit is right now, the damage isn't permanent. Credit repair allows you to fix the mistakes hurting your credit and improve your credit score. List 10 Things You Can Do Today to Improve Your Credit Score UP NEXT in Credit Repair By LaToya Irby Read List Repairing your credit is critical to saving money on insurance, loans, and credit cards, but that's not the only reason to repair your credit. Better credit opens up new employment opportunities, even promotions and raises with your current employer. If you dream of starting your own business or just want the security of knowing you can borrow money when you want to, you should repair your credit sooner rather than later.Can You Repair Your Own Credit?You've probably seen advertisements for credit repair on tv, radio, the internet, or even on the side of the road. The good news is that you don't have to hire a professional to fix your credit. You can do all the same things a credit repair company can do, so save some money and the hassle of finding a reputable company and repair your credit yourself.Start With Your Credit ReportBefore you can get started, you have to know what you need to repair. Your credit report contains all the information that's contributing to your bad credit. This could be past due accounts, debt collections, high credit card balances, or public records. Read through your credit report to identify the negative items affecting your credit score.Get a Free Credit ReportBy law, you’re entitled to free credit reports from each of the three credit bureaus each year. This yearly free credit report is available only through AnnualCreditReport.com. You can also order by phone or mail if that's more convenient.There are a few other situations where you're entitled to a free credit report:You've been turned down for credit because of something on your credit report in the last 60 daysYou're currently receiving government assistance Article How Do You Remove Debt Collections From Your Credit Report? UP NEXT in Credit Repair By LaToya Irby Read Article You're unemployed and planning to look for a job soonYou think you've been a victim of credit card fraud or identity theftYour state's law gives you an additional free credit report each yearThese free credit reports should be ordered directly through the credit bureaus.Paying for Your Credit ReportIf you've already used up your free credit reports for this year, you can order your credit reports directly from the credit bureaus or myFICO.com for a fee. The bureaus all offer a three-in-one credit report that lists all three of your credit reports side-by-side. The three-in-one credit report costs more than a single credit report, but less than the combined price of purchasing your individual credit reports.Why Order All Three Credit Reports?Some of your creditors and lenders might report only to one of the credit bureaus. And, since credit bureaus don’t typically share information, it’s possible to have different information on each of your reports. Ordering all three reports will give you a complete view of your credit history and allow you to repair your credit at all three bureaus instead of just one. Review Your Credit Reports for ErrorsRead your credit reports thoroughly, checking for things that may be inaccurate. It may be a lot to digest, especially if you're checking your credit report for the first time. Take your time and review your credit report over several days if you need to.Reading Your Credit ReportBecome familiar with the information in each of your credit reports. Regardless of where you've ordered your credit reports, they'll all contain:Your personal identifying informationDetailed history for each of your accountsPublic records like bankruptcy and tax liens Inquiries from companies who have pulled your credit reportDeciding What Needs RepairHere are the types of information you'll need to repair:Incorrect information, including accounts that aren’t yours, payments that have been incorrectly reported late, etc.Past due accounts that are late, charged off, or have been sent to collections.Maxed out accounts that are over the credit limit.Highlight or underline each type of information in different colors to help you make a credit repair plan. Article How to Remove a Charge-Off From Your Credit Report UP NEXT in Credit Repair By LaToya Irby Read Article You'll take a different approach for each type of information. Highlighting in different colors save time re-reading your credit report each time you're ready to make a payment, call a creditor, or send a letter.Dispute Credit Report ErrorsYou have the right to an accurate credit report. You can dispute any information in your credit report that's inaccurate, incomplete, or you believe can't be verified. When you order your credit report, you'll receive instructions on how to dispute credit report information. Credit reports ordered online typically come with instructions for making disputes online, but you can also make disputes over the phone and through the mail.The Best Method for Credit Repair DisputesDisputing online is faster and easier, but outside of screenshots you take, you won't have a paper trail for the process.Sending your disputes by mail has several advantages. First, you can include proof supporting your dispute, for example, a canceled check showing you made a payment on time. You can also keep a copy of the dispute letter for your records. Finally, if you send your dispute via certified mail with return receipt requested — which you should — you have proof of the date you mailed the dispute. This is important because credit bureaus have 30-45 days to investigate and respond to your dispute.You might end up sending several dispute letters. Save a credit report dispute template on your computer that you can modify for different disputes and different credit bureaus. This will save you time and keep you from writing a new letter from scratch each time.Sending Your DisputeWhen you send your dispute, you can include a copy of your credit report with item you're disputing highlighted and a copy (not the original) of any proof you have that supports your dispute.Be sure to include enough information about your dispute. Otherwise, the credit bureau can decide your dispute is frivolous and decline to investigate the dispute or update your credit report.As long as your dispute is legitimate, the credit bureau will conduct an investigation. This investigation is often as simple as asking the creditor if the information is accurate. Once the investigation is complete, the credit bureau send you a response to your dispute.Credit Bureau Dispute AlternativeYou can send your disputes directly to the bank or business who listed the information on your credit report. They have the same legal obligation to investigate your dispute and remove inaccurate, incomplete, or unverifiable information from your credit report. Disputing directly with the information furnisher is necessary for errors that the credit bureaus "confirms" are accurate.What Happens After a DisputeIf the dispute is successful and your credit report is updated, the bureau will make the change, alert the other credit bureaus, and send you an updated copy of your credit report.On the other hand, if the item isn't removed from your credit report, your report will be updated to show that you've disputed the information and you'll be given the opportunity to add a personal statement to your credit report. Personal statements don't affect your credit score, but can provide additional insight into your dispute when a business manually reviews your credit report.Tackle Past Due AccountsPayment history impacts your credit score more than any other factor — it's 35 percent of your score. Since payment history is such a large part of your credit score, having several past due accounts on your credit report will significantly hurt your score. Taking care of these is crucial to credit repair. Aim to get past due accounts reported as “current” or “paid.”Get current on accounts that are past due, but not yet charged-off. A charge-off is one of the worst account statuses and happens once your payment is 180 days past due.Accounts that are delinquent but less than 180 days past due can be saved from being charged-off if you pay the total past due amount. Beware, the further behind you are, the higher your catch up payment will be.Contact your creditor to discuss options for bringing your account current. Your creditor may be willing to waive late penalties or spread the past due balance over few payments. Let them know you're anxious to avoid charge-off, but need some help. Your creditor may even be willing to re-age your account to show your payments as current rather than delinquent, but you'll have to actually talk to your creditors to negotiate.Pay accounts that are already charged-off. You're still responsible for a charged-off balance. As they get older, charge-offs hurt your credit score less. However, the outstanding balance will make it hard — and sometimes impossible — to get approved for new credit and loans. Part of your credit repair must include paying charge-offs.If you pay a charge-off in full, your credit report will be updated to show a $0 balance and a "Paid" status. The charge-off status will continue to be reported for seven years from the date of charge-off.Another option is to settle charge-offs for less than the original balance. With a settlement, the creditor agrees to accept the lower payment and cancel the remainder of the debt. The settlement status will go on your credit report and stay for seven years.You may be able to convince the creditor to delete charge-off status from your credit report in exchange for payment, but this isn't easily done. The most important thing is to pay your charge-off and if you can get a favorable account status, it's an added bonus.Take care of collection accounts. Accounts get sent to a collection agency after they've been charged-off or become delinquent for several months. Even accounts that aren't normally listed on your credit report can be sent to a collection agency and added to your credit.Your approach to paying collections is much like that for charge-offs, you can pay in full and even try to get a pay for delete or you can settle the account for less than the balance due. The collection will stay on your credit report for seven years based on the original delinquency.Take Care of Past Due Accounts:5 Ways to Deal With Past Due AccountsTactics For Paying CollectionsShould You Pay Old Collections?Bring High Credit Card Balances Below Their LimitsYour credit utilization — a ratio that compares your credit card balances to their credit limits — is the second biggest factor that affects your credit score. It's 30 percent of your score. The higher your balances are, the more it hurts your credit score.Having maxed out credit cards costs precious credit score points. Bring maxed out credit cards below the credit limit, then work to pay the balances off completely. Credit card balances less than 30 percent of the credit limit are better for your credit score. Below 10 percent is ideal.Loan Balances and Your Credit ScoreThe closer your loan balances are to the original amount you borrowed, the more it hurts your credit score. Focus first on paying down credit card balances first because they have more impact on your credit score. Then, reduce your loan balances.Past Due Accounts vs. High BalancesYou probably can't pay down your balances and your past due accounts all at once. Focus first on accounts that are in danger of becoming past due or charged-off. Get as many of these accounts current as possible. All of them if you can. Then, pay down your credit card balances. Third, work on accounts that have already been charged-off or sent to a collection agency.How to Calculate Credit Utilization5 Reasons You Shouldn't Max Out Your Credit Card5 Principles of Making Credit Card PaymentsGet New CreditAfter you’ve resolved the negative items on your credit report, work on getting positive information added. Just like late payments severely hurt your credit score, timely payments help your score. If you have some credit cards and loans being reported on time, great. Continue to keep those balances at a reasonable level and always make your payments on time. If you don't have any open, current accounts, you'll have to start over with new ones.Where to Get New CreditPast delinquencies can keep you from getting approved for a major credit card so limit your credit card applications to one, at the most two, until your credit score improves. This will minimize credit inquiries, which are added to your credit report each time you make a new application for credit. Too many credit inquiries hurt your credit score and your ability to get approved for new credit. Inquiries remain on your credit report for two years but only affect your credit score for 12 months.If you're denied for a major credit card, try applying for a retail store credit card. Still no luck? Consider a secured credit card which requires you to make a security deposit to get a credit limit. The security deposit makes the secured card a little tougher to get, but a secured card from a major processing network is better than a retail credit card.Use New Credit to Help Your Credit ScoreUsing Secured Credit to Rebuild Your CreditHow to Get a Credit Card With Bad CreditFind Credit Cards That Match Your Credit ScoreSeven Credit Repair TipsKeep these credit repair tips in mind as you work toward a better credit score.Salvage what you can. Don’t sacrifice accounts that are in good standing for accounts that are not. Continue making timely payments on all your current accounts.Spread your disputes over a period of time. If you're disputing several items on your credit report, only put one dispute in each letter and space out your disputes. The credit could become suspicious of too many disputes and consider them frivolous.Be careful closing credit cards. Rarely does closing a credit card help your credit score. In fact, closing a credit card is more likely to hurt your credit score, especially when the account has a balance.Learn what things hurt your credit score. Learn what things have a negative effect on your credit score so you can avoid making these mistakes.Your credit score may fluctuate. Your credit score may drop unexpectedly as you go through credit repair. This doesn't necessarily mean you've done something wrong. Continue adding positive information to your credit report and your credit score will improve over time.Consider consumer credit counseling. If your debts are overwhelming, creditors aren’t willing to work with you, and you can’t seem to come up with a payment plan on your own, consumer credit counseling is an option for getting back on track.If bankruptcy is inevitable, file sooner rather than later. If filing bankruptcy is the only way you can get back on track, don't waste time on strategies that won't work. Evaluate whether you should file bankruptcy early so you can start the process and begin to rebuild your credit and your life.