HOW CAN I RESTORE MY CREDIT?

During the financial crisis, your credit rating may have been damaged because you missed payments altogether or you were late in making payments. While you can’t repair your credit overnight—and be wary of companies that make such promises—there are definite steps you can take to get back to financial health.

1. Stop adding new credit-card debt. Continue to pay off your credit cards but stop using them. Instead, use cash, checks, or a debit card, which automatically deducts the amount from your checking account.
    
2. List your credit-card debt: the cards you have, the balances on each, and the interest rate on each card. The Debt Payoff Worksheet can help. Start paying off the card with the highest interest rate first, as you continue to make monthly payments on the other cards. When you’ve paid off that first card, apply the payments to the card with the second-highest interest rate and continue paying off your cards until you have paid off all your debt.
    
3. Review your credit reports. You can order a free credit report each year from the three main reporting agencies (Experian, TransUnion, Equifax) through www.AnnualCreditReport.com. Examine the reports and alert the agencies if you find errors. Follow the agency’s instructions to clear up mistakes and be patient. It can take a little while, but clearing up your credit reports is very important.
    
4. Pay your bills on time. It’s simple, but it’s one of the best ways to improve your credit rating.

Read more in the Federal Trade Commission’s consumer booklet, Debt Collection FAQs: A Guide for Consumers.