Do you have collection debt, judgments, a foreclosure, or even bankruptcy on your record? If so, rebuilding your credit might seem like an impossible task. Many consumers just assume they will suffer the consequences of bad credit for the next 7-10 years until negative items are removed from their credit reports. Maybe you figure “good credit” is so far out of reach, you can forget about qualifying for a mortgage or any other loan with a decent interest rate any time in this decade at least. What if I told you it is actually possible to rebuild your credit score after a blunder or two (or following multiple past mistakes) within a few years?

Obtain a free, safe copy of your credit report

First things first, obtain a FREE copy of your credit report. LSS Financial Counseling recommends Annual Credit Report as a safe way to access your credit report. At your request, the three major credit reporting bureaus (Equifax, Experian and Trans Union) are required to provide you with a free copy of your credit report once every 12 months. Click HERE to learn more about Annual Credit Report. Need help understanding your credit report? Get a review.Start making an impact on your credit score. Today.

It really doesn’t matter how much you messed it up in the past, you can still regain control and improve your score much faster than you think.

The actions you take, both good and bad, within the most recent 2 years of time, have the biggest impact on your credit score. This means that your credit suffers the most immediately after a negative item is reported. For example a credit score will most likely immediately drop after filing for bankruptcy, but as time passes, the negative mark won’t be such a big factor when calculating your score. Bigger factors are recent positive activity where you show that you can use a credit card responsibly on a consistent basis.

Establish a healthy credit history.

You need credit history in order to improve your score. So, to improve your score quickly, the most important thing you can do is establish a healthy revolving credit history going forward.

Don’t expect time alone to heal past credit wounds. If you’ve made credit mistakes in the past and you want to improve your credit score, then start using credit responsibly as soon as possible. For example, if you obtain a secured credit card immediately following a bankruptcy and you use that credit card responsibly, you will re-establish a healthy credit history and your score will continue to improve over time. This is assuming you always pay on time every month and keep revolving debt balances below 30% of the available credit limit.

Credit scores are complex.

Simply paying off bad/old debts will not give you good credit.

Recent positive credit history is a MUST in order to improve your score. If you clean up past mistakes without being proactive about the present, your credit score will not reap the benefits of your efforts. In fact, paying off old collections or satisfying judgments could lower your score initially, but it’s still important to satisfy old collection balances, if possible. It isn’t the best idea to ignore old debt in hopes they will eventually fall off your record. Even with recent positive credit history, what lender is going to give you a loan if you have outstanding collections listed on your report?

Be proactive.

Remember, it doesn’t matter how bad you’ve messed up your credit in the past, you can always bounce back within a few years if you take steps to establish a healthy credit history going forward, clean up the past, and check your reports regularly for errors.

Do you need help reading and understanding your credit reports? Give LSS Financial Counseling a call at 888.577.2227 to schedule a free credit report review session with one of our Certified Financial Counselors. We can help you create an action plan to get your credit back on track.

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