How to repair credit

Your credit score is a 3-digit number between 300 and 850, generated by a mathematical algorithm (a mostly secret formula) based on information in your credit report, as compared to information on tens of millions of other people. The resulting number is said to be a highly accurate prediction of how likely you are to pay your bills.


If it sounds boring and unimportant, you couldn’t be more wrong. Credit scores are used extensively these days. If you rent an apartment, get braces, buy cell phone service, apply for a job or call to get utilities connected, there’s a good chance your report and score will be pulled.

If you have an existing credit card, the issuer is likely to look at your credit score to decide whether to decrease your credit limit or charge you a higher interest rate. The higher the number, the better you look to lenders. People with the highest scores get the lowest interest rates. And, we hear, they’re getting the jobs.

Know your score

We know we can get our credit reports free at Now we can get our credit scores for FREE, too. Check your credit scores anytime, anywhere and never pay for it at You will need to create a simple, password protected account. No credit card required.

Here are the ways to improve our credit scores:

Pay your bills on time

Making your credit payments on time is one of the biggest contributing factors to your credit scores. Delinquent payments have a major negative impact on your credit score. If you have missed payments, get current and stay current. The longer you pay your bills on time, the better your credit score. Be aware, however, that paying off a collection account or bringing an account current will not remove it from your credit report.

Keep balances low on “revolving credit”

Using more than 30 percent of your available credit on your credit cards brings down your credit score. This applies to individual accounts and when you add up all of your available credit and compare it to how much you are using at any given day during the billing cycle. This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards.

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Pay off debt rather than moving it around

The most effective way to improve your credit score is by paying down your revolving credit. Getting your balances down to $0 will send your score soaring.

Don’t close unused credit cards

Closing accounts might sound like a great short-term strategy to raise your score, but it’s not. This will close the gap between your outstanding debt (the amount of credit you are using) and the total amount available. Instead, use a clear strategy to close accounts, but only as it will not impact the gap between what you owe and the amount of credit available.

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Don’t open new accounts

More credit might seem wise in order to increase your available credit ratio, but it will be seen as a negative to your score. New or “young,” accounts are not useful in credit scoring because they dilute your average account age. Unless it’s a dire emergency, do not open new credit accounts.

Work on longevity

Make sure you maintain your oldest accounts. A great deal of weight is given to longevity, so the oldest account you have is the most valuable.

Stick with it

As with a lot of things in life, time is the best “healer.” Do the right thing by managing your finances responsibly and your credit score will take care of itself.

Get help!

If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This won’t rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your credit scores. But beware. There are lots of shysters out there masquerading as negotiators, settlers and credit counselors.

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You can find a legitimate, certified credit counselor at The National Federation for Credit Counselors is the nation’s first and largest nonprofit dedicated to improving people’s financial well being.

Go to to get immediate help online, or call 800 338-2227 right now to be connected with a counselor near you. NFCC offers credit/debt counseling, bankruptcy counseling, housing counseling, reverse mortgage counseling, student loan debt counseling and debt management plans.

NFCC is legit. In fact, NFCC is the only credit counseling organization I recommend and endorse. They’ve been around for many years and have earned the highest reputation. NFCC is a wonderful organization you can trust that has come to the rescue of thousands of my readers over the years. They’re ready to help you, too!

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Consult a Credit Repair Expert

specialistsWhile a guide such as this one can surely make the process of credit repair a bit easier, there’s truly no such thing as easy or quick credit restoration.  The entire ordeal requires an inordinate amount of patience and focus.  Many folks decide they don’t have it in them or would rather just not spend the time.  And that’s perfectly fine because there are professionals who can help you out and take the burden off of your shoulders.

We at Credit Marvel have narrowed down the list of professionals to include only the best credit repair companies out there.  Please be aware that there are a lot of scams out there.  You run the risk of encountering cheats who offer convenience while promising the world, and give nothing in return.  Protect yourself from further fraud by not straying from the professionals listed here on our site:

Let the pros analyze your credit report, outline a personalized road-map to achieving your goals, go through the dispute process with the credit bureaus, and even negotiate with your creditors to help reduce your payments and get you back on track.  If the thought of working through this process gives you the slightest anxiety or procrastination, just hand it over to a specialist and be done with it.


Repair and Remove Bad Credit Information

To begin repairing and rebuilding your credit, you need to obtain the most recent version of your credit reports. Each credit report contains detailed information about your credit history, including your payment history, credit utilization, and current debt balances. By law, you are entitled to receive a free credit report from each of the three major credit bureaus through

Your credit scores are calculated using the information in your credit reports. By clearing up any existing issues in your credit reports, you will automatically improve each corresponding credit score.

If you find incorrect information listed on your credit report, you can file a dispute with the business who provided the information and/or to the credit bureau who included the information on your credit report. If your dispute is valid, both parties (the business and credit bureaus) are required by law to remove any false information. Most disputes are handled 100% online, and you can find detailed instructions on submitting your dispute through the Federal Trade Commission and Consumer Financial Protection Bureau.

When reviewing the information in your report, pay attention to the following categories:

Personal Information

Your credit report includes detailed personal information, such as your full name, date of birth, employment information, current and former addresses, and Social Security number.

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When reviewing this information, make sure there are no surprises listed. If you find any incorrect information, it could be either a mistake or identity theft. Either way, you will need to file a dispute with the appropriate credit bureau to have the record removed or updated.

Credit Inquiries and Public Records

Your credit report lists all of the companies who have pulled your credit in the past two years. As with personal information, you need to make sure the credit inquiries were initiated by you. If you see unknown inquiries, this is another potential sign of identity theft.

You will also find a section in your report dedicated to public records. This would include information about any bankruptcies, liens, foreclosures, or court rulings. Make sure everything listed is accurate and true.

Even if the public records are accurate, you should verify the dates. By law, negative information in your credit report must be deleted after a specified period of time. If the allotted time period has passed, you can file a dispute and the information will be immediately removed from your report.

  • Chapter 13 Bankruptcy: Remain on your report for 7 years from the date of filing.
  • Chapter 7 Bankruptcy: Remain on your report for 10 years from the date of filing.
  • Civil Judgements: Remain on your report for 7 years from the date of filing.
  • Tax Liens: Unpaid liens remain on your report for 10 years from the date of filing. Once paid, the lien will remain for 7 years from the paid date.

Credit Accounts

The section of your credit report related to existing and historical accounts is extremely important when repairing your credit. Here you will find a detailed record of all credit accounts, including creditor names, account numbers, current balances, payment history and account status (including whether or not the account is past due).

First of all, verify that all of the accounts listed in this section are accurate. If there are any unknown accounts or incorrect negative remarks mentioned in your payment history, you can easily dispute this information and have it removed.

After verifying the information, you should verify the dates. As with court rulings, negative account information must be removed from your report after a specified period of time. If it remains after that date, you can file a dispute and have the negative information deleted.

Late payments remain on your report for 7 years from the original delinquency date. When late payments extend beyond 180 days, most creditors will mark your account as “charged-off” and possibly sent to a debt collection agency. Like late payments, collection accounts remain on your report for 7 years.

Some quick facts for you to keep your scores high:

  • Don’t close out credit cards – your scores are generally kept higher when you have the ability to use credit, but choose not to.
  • Try to keep your credit card debts below 40% of the maximum allowed.
  • Keep inquires down. New credit applications or credit checks. This affects your scores because the bureaus do not know if you have taken on “new debt” so they lower your scores a bit in the short term to wait and see if you went on a “new “ shopping spree and don’t yet have a history to show the ability to repay those newly incurred debts. Makes sense, right?
  • If you were late, contact your lender and ask for “one time forgiveness.” Most lenders/creditors have a policy were they will remove it – “once.”
  • Paying off an old collection could hurt you. This makes no sense to you and me, but the credit report has washed it down the road and “forgot” about it and has penalized you less and less each month as that “bad debt” has gone by in the rearview mirror; however, if you pay it off today it updates that collection to today’s date and now it shows as a “paid” collections and your credit scores have likely dropped due to that update. We recommend that you consult us first so we can review it and determine what is best.
  • Credit Counseling, I have never seen this as a “good” thing. Many of them tell you to stop paying your debts so they can then negotiate them. I would use caution when entering into any agreement and consult us at the same time.
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Below is a pie chart and further explanation of credit scores:

rebuilding poor credit chart

Data from your credit report goes into five categories that comprise your FICO score. These are:

Payment History (35%) This includes any delinquencies and public records. A record of negative information can result in a lowering of a credit score. Risk scoring systems look for the following negative events: collections, late payments, charge-offs, repossessions, foreclosures, bankruptcies, liens and judgments. Within these items the FICO determines the severity of the negative item, the age or when the negative event occurred and the numbers of these negative events that occurred. Multiple negative items as well as newer negative items have more of an impact on the FICO than less severe and older items. You may have a recent late on your car payment which will have more of an impact that a late which occurred eight months ago.

Amounts Owed (30%) This is how much you owe on each of your accounts. The amount of available credit on revolving (credit cards) accounts compared to what you owe has a large significance in the scoring. This is termed “Revolving Utilization” or “open to buy” This is calculated by taking the aggregate credit card limits and multiplying the results by 100. The higher the percentage is the more of a negative impact this has on the score. A general rule of thumb is this percentage should not be more than 30%.

Length of Credit History (15%) This is when you opened the accounts as well as the time since the last activity. The age of the credit is determined by the oldest “account opened” date as well as the average age of the accounts opened in the file.

Types of Credit Used: (10%) This includes a variety of accounts you have such as revolving (credit cards), installment (loans) and mortgages.

New Credit (10%) This includes your pursuit of new credit, which includes credit inquiries (companies that pull your credit) as well as the number of recently opened accounts. There are several kinds of inquiries that may or may not affect the credit score. There are “soft inquiries” which remain on the credit report for 6 months, but are not visible to lenders or credit scoring model. These are the following:

  • Pre-screening inquiry where a credit bureau sells an individual’s contact information to an institution that issues credit cards, loans or insurance.
  • A creditor may also periodically check a customer’s credit report.
  • A credit-counseling agency.
  • A consumer can check his or her own credit.
  • Employment screening.
  • Insurance related inquiries
  • Utility related inquiries.

Overall, credit makes the world go around as the expression goes. It affects a first time homebuyer’s ability to borrow money and at what rate. Those with a lower credit score may be paying much more each month in higher interest rate loans than those with higher credit scores or they may be unable to obtain the loan at all if their credit score is too low. A low credit score can result in someone being unable to obtain a new car, boat, mortgage, credit card or loan they may need. Understanding what credit is and how to maintain a strong credit score is becoming more and more important in our society. As a first time homebuyer, it’s imperative to understand the importance of credit. Just as we want to build up our careers, income and net worth all the while maintaining a healthy and active lifestyle, so must we maintain healthy credit.

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