How to repair credit

Bad credit can hurt an individualís chances of owning a home, financing a car or other large purchase, and as employers lean more and more towards background checks, bad credit may jeopardize employment in the future. Regardless of how it was broken, repairing credit is essential to those who hope to have a financially secure future.

Begin by requesting a copy of your credit report. Individuals can now request a copy from the three major credit bureaus (Experian, Equifax, and Trans Union) for free each year. Review your credit report and check for any discrepancies. If you find any, follow up immediately with the source in question.

If you are experiencing heavy debt due to credit cards, close all accounts but one. Keep the one with the lowest balance open and use it only for dire emergencies and pay this credit card bill on time each month. If you are behind on other balances, pick up the phone and explain your intention to catch up and make good on your bill. Often, you can negotiate a payment arrangement and interest rate that works for you.

If you leave several accounts open, your credit report will not only reflect what you still owe, but will show how much more you are capable of spending. So remember to close them out when making payment and interest rate arrangements. Be sure to pay the agreed upon amount on time each month, and if you are going to be late, try calling to let them know Ė this may delay reporting of late payment to your credit report.

Medical bills are often another source of credit damage. If you have an outstanding balance with a doctor or hospital that has not yet gone to collections, call and speak with the billing department manager. Negotiate an amount you can afford to spend each month and a date on which you will send it. If you have a bill that has already gone to collections, you can not negotiate with the office or hospital, but you can agree to send the collection agency what you owe. However, only agree to send what you can reasonably afford. Never agree to send the full amount if you canít pay it. This will only result in further damage.

As you begin to pay back your creditors in a timely fashion, your credit rating will slowly begin to improve. Remember that credit card companies and banks should be your first priority, followed by utility companies and hospital bills. Communication with all of your creditors is essential in working out an agreement that will begin to build your credit back. Only by paying back what you owe can you improve your credit rating.