Credit Management

How to Rebuild Your Credit

Rebuilding a Good Credit Score

If you’ve had credit problems in the past, you probably feel frustrated and worried that your damaged credit history will stay with you forever and you’ll never have a good credit score again. In almost every case, however, there are strategies you can use to put your credit back on track. If you actively work on improving your credit score, you will see results. It may not happen as quickly as you hope – or it may happen more quickly than you expected. Some consumers are able to buy a home in as little as a year after being on a debt management program, for example. It all depends on your financial situation and whether you are willing to take the time and effort required rebuilding your credit.

What is the first step to rebuilding your credit?

Your first step is to get a copy of your credit report, preferably from all three major credit bureaus. You’ll find a good source for credit reports at www.AnnualCreditReport.com where you can get a copy of your report. Once there you’ll have the option to order your credit scores from Experian, Equifax and Trans Union. With this information, you’ll be able to create a game plan for improving your credit score. We also recommend you read Make the Most of Your Credit Score, a free publication from Consolidated Credit Counseling Services Inc.

How long can information stay on your credit report?

The first thing most people with bad credit want to know is, “How long can this information haunt me?” and “How long will it take for me to rebuild my credit?” Under the Federal Fair Credit Reporting Act, credit reporting agencies are not allowed to report any information that is too old, incomplete, or wrong.

While positive or neutral information can be reported indefinitely, negative information can only be reported for the following length of time:

Bankruptcy Filings - Ten years from date filed, not discharged. The three major credit bureaus, and many smaller ones, have agreed voluntarily to remove Chapter 13 bankruptcies -- a bankruptcy where debts are paid back over several years -- seven years from the date of filing. If that doesn’t happen automatically you’ll have to ask.

Civil suits, civil judgments, and records of arrest - No longer than seven years from the date of entry, or the current governing statute of limitations, whichever is longer.

Paid tax liens - Seven years from the date satisfied (paid).

Unpaid tax liens - Indefinite until the lien is paid (see above).

Collection or charge-off accounts - Seven years unless a US Government insured or guaranteed student loan, or National Direct Student Loan (NDSL). If those types of student loans are in default and you bring them current for an entire year, your previous late payments will be deleted.

Any other adverse information (including late payments) - Seven years. Adverse information is any data that may cause an unfavorable result for the consumer, for example; being turned down for credit, employment or insurance; or being charged a higher rate than applied for in the case of credit or insurance.