Good credit is the key to a lower interest rate on a home or auto loan. Good credit could also help you land a job, as some employers equate a high credit score as a sign of a responsible person. It is not uncommon for people to get into bad spending habits and cause their scores to fall. Repairing bad credit takes time, effort and a high level of dedication in resisting the spending urges that got you into trouble in the first place.

Cleaning Up Your Report

According to the Federal Trade Commission, each consumer in the United States is entitled to one free credit report per each calender year. Order your reports immediately and scan them for errors. Look for any problems with your personal information, including your past addresses or aliases. Be sure you recognize all of the credit accounts on your report and that the limits assigned to each entry are correct. Be sure there have been no new reports opened in your name that you do not recognize. If you find errors, contact the credit agencies using the procedure outlined on your credit report and ask that the errors be corrected.

Use Your Credit Wisely

You can use past credit accounts to help you rebuild your credit score. Begin by paying off older credit accounts that are still active but that you do not intend to use. Once they are paid off, do not cancel them. Having anything on your credit report that is old but reports as positive will raise your credit score. Use some of your credit but avoid maxing out any of your accounts. According to Bankrate.com, you should use no more than 50 percent of any given credit card's available balance. Maxing out credit cards causes your credit score to drop, but maintaining a balance on a few of your cards will help strengthen your credit score.

Credit Payments

One of the best and fastest ways to start repairing credit is to make your scheduled monthly payments on time and to always pay at least the minimum amount due. Gather your credit bills and write their due dates on your calendar each month, and then make sure you get those payments in on time. Use online payment options or sign up for automatic bill paying through your creditors to make sure your payments are made on time. Automatic bill paying is where your creditors automatically take your payment from your bank account each month without you having to do anything. Just be sure that there is always enough money in your account to cover your payments.

Source:

Federal Trade Commission: Credit Repair: How to Help Yourself

Bankrate.com: Do-it-Yourself Guide to Credit Repair

Debtworkout.com: Credit Repair and Credit Rebuilding Information

Resource:

Experian Credit Reporting Agency

Equifax Credit Reporting Agency

Trans Union Credit Reporting Agency