The DIY guide to repairing your own credit


In today’s modern world, having good credit is a must. Your credit score can affect everything from buying a car, getting a good job to taking out a mortgage on your dream home. So what is credit? How is it used? And what do you do if you have no or poor credit? This DIY will be an important guide for repairing your credit by telling you what you need to know about what credit is and what you need to do if you have poor or bad credit.

What Credit is
First, it’s important to understand what credit is, what forms credit takes and good credit habits that will ensure you get the credit you deserve. Simply put credit is an arrangement to purchase goods or services that are paid back at a later date. There are many different forms of credit. However, for the purpose of this guide, we’ll be focusing on mortgages, loans and credit cards.


Mortgages: Are a type of loan for consumers looking to purchase a home or property where the consumers contact a financial intuition such as a bank or credit union to request financial aid for the purchase of a large ticket item such as a house, boat or car. The bank or credit union then provides the funds needed for the property being purchased meaning if a customer is unable to keep up repayment on the mortgage, they could lose the property to the bank.


Loans: There are two types of loans available to consumers, unsecured and secured. Unsecured loans are also called a personal loan which is generally used to buy items such as a car and are provided on the base of being credit worthy. Personal loans don’t require collateral and are provided without the need for additional security. Secured loans are the opposite of unsecured loans because, in addition to credit worthiness, collateral such as property or cars is held as security.

credit card

Credit cards: Credit cards can be issued by a bank, credit union or credit card provider such as American express. The card carries the Visa or Mastercard logos and allows consumers to pay for goods or services in shops or online using a pre-set limit of credit on the card. Credit cards are issued with these pre-set limits based on credit worthiness and can be used worldwide at vendors carrying the card’s credit logo. Statements on amounts spent on the card are sent to customers listing card transactions for a given period and lists the payment required to continue using the card, the date payment must be made and the minimum payment amount. Consumers should note that if the total balance on the card is not paid in full each month, interest is charged on the amount outstanding.

Financial credit records are kept by National credit bureaus and list all credit activities that an individual as with a lender. Most consumer credit information in the United States is kept by four National traditional credit reporting agencies:

This is in addition to smaller firms such as doctors’ offices that also keep track of financial data. There are three ways to ensure you keep your credit on track:

  1. Pay your bills on time every time.
  2. Keep your credit card balances low because the higher your balances are the worse your credit score becomes. So, try to keep your balance within 30% of your limit.
  3. Watch your credit report for errors, identity theft and credit card fraud which can lead to misleading or incorrect information on your credit report making it important to keep track of your credit data.

How missing payments can affect your creditCredit+Score

When repairing your own credit, you should understand what happens with payments. What happens when you miss a payment or fall behind on personal debt? Bad Credit. Bad Credit and a bad credit score show past failures in keeping up credit agreements which will create an inability to be approved for further credit accounts. Bad credit will stay on your credit report for a period of up to seven years or ten years in the case of bankruptcies which makes it very important that if you have bad credit you work to repair it. But, how do you repair your own credit?

One of the most important steps on your journey to repairing your credit is to get a copy of your credit report. You need to know exactly where you need to focus your efforts to repair your credit. If you see incorrect data on the report, you should immediately dispute it in writing to the credit bureau or creditor that provided the information for investigation and removal.

Here’s where you can contact the three top credit bureaus if you dispute information contained on your credit report:

When working to repair your own credit, it is important not to apply for any type of new credit. The reason being that making new applications creates new credit inquiries on already negative information and opening a new account with negative credit can bring your credit average down lower and further affect your credit score. Paying off past due balances can positively affect your credit because payment history makes up over 30% of your credit score. Try to pay off past due balances before they’re charged off (a charge off is when an account is closed, but the balance is still owed) or sent to a collection agency.

Debt collections and your credit


Once you begin to begin to pay off your debts, be sure to consider the effects of debt collection agencies on your credit repair efforts. Be aware that debt collection efforts are some of the most severe types of negative credit information to be listed on a credit report. Debt collection begins when a lender sends a delinquent account to a third-party debt collector who makes a living by collecting on unpaid debts for others. Most credit card accounts are sent to debt collection agencies after 180 days of non-payment, but can be sent earlier depending on the company. Be sure to review a credit card or loan agreement terms and conditions whenever you accept a credit card to understand the time frame that debt collection efforts could begin. Making on-time payments on your accounts can lessen the effects of debt collection activities on your credit.

If your account is sent to a third-party collector, here’s a few tips you’ll need to know in order to lessen debt collections negative effects while you continue to work on repairing your credit.

* Request a statement from the firm which outlines the original debt amount plus any additional fees.

* Negotiate payment terms such as a debt settlement which means you offer the amount of money your have available as single lump sum payment to settle the debt in full.

* Make sure to request proof the debt is yours. In addition, if the debt is attached to your social security number, and you are certain you did not borrow the money, then the debt as identity theft and file a police report. Once your identity theft report as been filed with the police, mail a copy to the collection agency who are by law required to stop collection activities against the debt.

Debt Settlement: the pros and cons


Debt settlement is when you settle a debt with a creditor for less than the amount owed. When settling a debt with a creditor, a consumer can reduce the debt by almost 30% of the original amount owed. There are some pros and cons that you need to consider before beginning a debt settlement process with a creditor.


  • Debt can be reduced by up to 30%.
  • It allows you to pay your outstanding debt amount for a smaller amount.


  • It can negatively affect your credit score.
  • Only one debt at a time can be addressed meaning that there would be a continuing debt collection efforts being made by other creditors.
  • You must pay the amount negotiated in one lump sum within a short time of making the debt settlement agreement.
  • It only works on unsecured loans such as a credit union loan or debts with no collateral like credit cards.

In order to make debt settlement work for you, try to save up to 50% percent of the amount you owe on a debt. One you have saved that amount, contact the lender to negotiate acceptance of the amount you have available. If the lender agrees to the amount you offer, request acknowledgement in writing and pay the lender by money order or cashier’s check to keep evidence for your records

Credit counselling services


A credit counselling service is another good way to reduce or eliminate your debt. These generally non-for-profit services act has a go-between for consumers and primarily credit card companies plus utilities helping consumers set up a budget and make a payment plan to get out of debt. During initial meetings with a credit counsellor, the counsellor will review your bill, income plus the total amount of debt you owe. They will then work with you to create a plan to get out of debt.

Credit counselling is a good way of planning a realistic budget while also getting you out of debt. Once you and your service set up a payment plan, arrangements will be made to deposit creditor payments to the service who will then make the payment for you with the creditor. Credit counselling services stop collection calls and debt collection efforts due to acting as an impartial third party making the payments between a creditor and a consumer. Credit counselling services are great ways to reduce payment amounts.
Payments to your creditors will be made through your credit counsellor until all debt payments are made in full.

Here are two very good reasons you should consider a credit counselling service to help reduce or eliminate your outstanding debts:

  • Work with a credit counselling service looks good on a credit report.
  • It is a better option for getting out of debt than debt settlement or stopping payments to your creditors altogether.

Loan Consolidation

If you are behind on making payment on a secured loan, you may want to consider Loan Consolidation. Loan Consolidations are based on credit, if you’re quite behind on secured loan payments, this might not be the right option for you. Loan Consolidations are available to help consumers make payments more manageable while also lowering their interest rate. They are instalment loans that need to be paid off at a set time.

Loan Consolidation only works in earlier payment issues and consumers must understand that good spending habits need to be maintained or credit problems can start again, but with the additional weight of potentially losing a home if a second mortgage was taken out to consolidate earlier payment problems.



As a last option to a credit crisis to repairing your own credit, a Chapter 7 Bankruptcy can be filed which would wipe out any need to repay outstanding debts. Understand that filing for bankruptcy is serious business not to be entered into lightly. However, the options are available for consumers unable to pay off any of their outstanding debts. If you file Chapter 7 bankruptcy, you’ll need to pass a means test that shows your income compared against a State median income qualification and you must attend consumer credit counselling. If you have equity in a home or car, you could be required to give them up as assets to help settle the debt package.

However, be advised that the following can’t be included in a bankruptcy filing:
Child supports payments
US Tax debts
Student Loans

The bankruptcy is filed in your State court and becomes a matter of public record. You’ll need to file bankruptcy forms showing: current income and liabilities, assets and liabilities, a statement of financial affairs for the previous three years and schedule of executory contracts. You must also attend credit counselling within an 180 days before filing for bankruptcy.

Total charges for filing for Chapter 7 bankruptcy is $335 and filing fees are due at the Clerk of Court when the petition is filed. But, permission may be granted to make a maximum of four periodic payments with the last payment due no longer than 120 days after you file.

After filing your case, a trustee will review your assets to determine if they are exempt or non-exempt from the filing. Non-exempt items would be sold while exempt assets would remain yours. If the trustee finds that all assets are exempt, which is generally the case, they will file the information will the court. Before the completion of the bankruptcy, a creditors will be given a chance to discuss and review your financial situation. After filing the bankruptcy paperwork, the trustee and creditor reviews are done, the bankruptcy can then be discharged which means that all debts on the filing have been completed. Creditors are notified in writing and advised that they can no longer pursue any debt collections efforts.

With patience and care, it is possible to repair your credit and improve your financial future. Make no mistake keeping a good credit score is important for not only purchasing a home, but it’s also important for managing a good life. The tips and advice in this DIY guide are sure to put you on the road to a brighter financial future. So take control of your credit future, you’ll be glad you did.

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