The first step toward credit repair is to order a copy of your credit report so you can see what's on it. Once you receive it, you'll want to review all the information. Not only do you want to make sure the positive information is accurate, but you should also review any derogatory (negative) items. Even something as simple as a wrong address could affect your credit score, so if there's any inaccurate information on your report, submit a dispute to the bureau in question (or all three) and have the inaccuracy altered or removed. Then, you can tackle the negative items in the following ways:
- Late payments, charge-offs and collections: Since your payment history has the most impact on your credit score, these are the things you should fix first. You should get current on any delinquent accounts, first, then negotiate with creditors and collection agencies to remove any charge-offs and collection accounts. They're not actually required to work with you, but many will.
- Over-limit accounts and high balances: These types of accounts have the next largest impact on your FICO scores, so they should be the next thing you tackle. First make sure any over-limit accounts are brought below the credit limit, which will also save you money on fees, then work on bringing everything else down to lower balances. Ideally, your credit card balances should be 30% or less of your credit limit.
- Outstanding judgments: Unless you pay off any outstanding judgments, they will continue to adversely affect your score until you do, or until they fall off your report in seven years.
- Defaulted student loans: Contrary to popular opinion, these defaults are not always permanent. Most lenders will work with you to bring your loan current, though you may have to make on-time payments for several months before they're considered current.
- Bankruptcies, foreclosures, paid judgments, and paid tax liens: There's nothing to repair with these types of account, except to wait it out and focus on rebuilding your credit in the mean time. One way to do this is to open a new account, charge small amounts on it, and pay your bill to zero every month. If a regular credit card isn't something you can get, apply for a secured card, and do the same thing.
It's true that all of these things will take time and patience, as well as some level of self-sacrifice, but in the end the result will be good credit, and peace of mind.