In this economy, many have succumbed to impaired credit. More and more, people have taken to utilizing credit for day to day expenses.

The use of cash (green paper with faces and numbers) is rare. It is much easier, and often more dangerous, to use a credit or debit card.

The increase in credit usage, loss of employment, down-sizing, and an increased cost of goods and services are the perfect environment for missed payments and a poor credit score.

Missed payments will affect your creditworthiness, and therefore negatively affect your ability to get credit.

Credit doom and gloom does not have to be the final answer for your credit.

Everyone can improve their credit, even those with the worst credit ranking. It takes education, perseverance, and time to repair and improve your credit.

Remember, poor credit comes over time. Repairing credit will not happen overnight.

There are agencies that can offer to assist you with credit repair and some charge a fee for their service. Buyers beware. Everything that they offer to do, you can do for yourself. In the end, not only will you improve your credit, but you will also achieve a sense of accomplishment because you have remained in charge of your financial destiny.

Knowledge is Power

To repair your credit, the first step is to contact the credit reporting agencies and request a copy of your credit report. Every American is entitled to one free credit report per year from each of the three agencies (Equifax, Experian, and TransUnion).

Upon receiving this report, review it line by line to ensure its accuracy.

Evaluate if the account information listed are correct (watch for identity theft), and that inquiries listed are inquiries that you have authorized.

If an error is located, it is imperative to contact the credit reporting agency, in writing, with a copy of supporting documentation to dispute the inaccuracy. Keep the letter short and to the point. Limit the number of accounts in dispute, per document. Three disputes per document are enough. Ensure that all account numbers are correct and that supporting documentation is appropriate.

Review the Fair and Accurate Credit Transactions Act. Know your rights.

These days, people do almost everything online, which is fine. I do, however, recommend that the dispute is written (typed), dated, signed, and mailed to the appropriate address via certified mail w/signature request.

The credit agency has 30 days from receipt to investigate the dispute and make any corrections to the report. Do not contact the creditor; just the credit reporting agency if there is an inaccuracy.

An annual (or semi-annual) check of your credit report will ensure that the information therein remains accurate.

Some people choose to freeze their credit report in instances of suspected identity theft.

Wallet w credit cards

Have a Plan

Now that you have the knowledge and know what your debts are, it is time to make a plan to pay!

Write everything down and come up with a budget (the dreaded ‘B’ word). Decide the order in which the payments will be made.


Begin to make payments! Credit agencies do take into account the amount of debt in relation to the amount of credit available.

The length of time that it takes to repay a debt also has an effect on your credit score.

It is best to pay more than the minimum required to all debtors. If this is not possible, contact the creditors to make repayment arrangements. Inform the creditors of your desire to honor your end of the credit agreement. Once an arrangement has been agreed upon, it is imperative that you get the agreement in writing and keep your word.

Any change (other than sending in more than agreed upon) in your ability to keep that arrangement, you must contact the creditor immediately.

Sometimes the only option is to ask for a settlement. This means that you settle your debt for an agreed amount that is less than the original debt. A portion of your debt is forgiven.

For those who make this kind of arrangement with a creditor, make sure that the credit bureaus have this notation on your credit report.

It is best to get an agreement in writing and a final statement showing a zero balance and keep it. You may need this document in the future should your credit report later show a discrepancy.

In the best case scenario, you would aggressively pay your debt with the goal of paying your debt off early, by paying more than the minimum balance monthly.

Once you have paid your credit down and a card must be used, be sure to pay it in full monthly. This will improve your credit score.

Eliminate Temptation

Cut up all store cards!

This is a painful suggestion.

Be strong.

Now, go cut the plastic cards and discard.

People tend to hold onto plastic cards and tell ourselves that they are “just for emergencies”. Since when are purchases of clothing, restaurant meals, or toys emergencies?

Re-evaluate what a true emergency is.

When the temptation is too strong, eliminate the temptation!

Numerous open credit card accounts hurt your score in several ways.

First, as a person increases the number of open credit cards their credit score decreases. Remember, the more open accounts on your credit report, the lower your  debt to credit ratio becomes.

Second, lenders and bureaus look at the ratio of debt to available credit. Hypothetically, a person could max out all of their available credit, significantly increasing their debt. A high debt load (amount of available credit that can be used) is high risk for default.

If you must hold plastic, use a debit card to make purchases to truly pay for the purchases on the spot. This helps you to spend what you have in the account.

No bill.

No payments are forgotten.

No negative activity on your credit report.

Try to decrease the number of credit cards to one or two cards.

Be Heard

Did you know that it is your right to add comments to your credit report? Don’t feel bad. Most people are unaware of this. Take advantage of this opportunity.

The comments are not to give a soliloquy about your life and hardships over time.

Provide a short explanation or clarification of errors, or reasons why a debt was not paid as agreed. Reasons such as hospitalization or disability should be mentioned.

Keep in mind that your credit rating will not be affected, but it allows lenders to take your situations into consideration when making their decision. Also, you will need to provide documentation to the validity of your comments. Contact the credit bureaus directly for instruction to do this.


No matter how impaired your credit is, it can improve. It takes time and diligence.

Getting control of your credit life is imperative to your financial future.

Focusing on guarding your credit report, awareness of your credit report, timely payments, keeping debt-load low, and keeping one or two credit accounts open will, over time, greatly affects your credit ranking. You have the power to change your financial future.

The information in this article is to be used for informational purposes only. It is NOT to be used in place of, or in conjunction with, professional financial advice. Anyone with questions regarding this or other finance issues discussed on this site must consult their personal financial consultant, accountant or banker for further information.