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How to Restore Your Credit After Hard Times

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How to Restore Your Credit After Hard Times

By Marco Carbajo, Guest Blogger
Published: May 7, 2013

Getting your financial life and credit back on track after going through tough economic times is not an impossible task by any means, but it does require an effective and proven plan.

Whether you had to file for bankruptcy; went through a foreclosure; dealt with excessive late payments, collections, judgments; a repossession; or the dreaded tax lien, the good news is there is hope in recovering and re-establishing a good credit rating.

First of all, don’t believe for a second that there’s nothing that can be done about past negative credit history — because there is. You can always work on repairing your credit reports; the Fair Credit Reporting Act protects your right to do so.

The first step to credit recovery is to establish new credit. The obvious step is to open up a secured credit card, right?

Well, not exactly.

The key is to establish at least three positive trades actively reporting on each of your reports with Equifax, Transunion and Experian. Actively reporting means you’re making regular payments; a loan that’s paid off does not count.

For example, if you’re currently making timely payments on a car note but have no other positive credit that’s active, then you should obtain two secured credit cards and use them regularly.

Keep your debt-to-credit-limit ratios on those cards at no more than 30%, and whenever possible increase your limits. The higher the limit, the better it is for you in the future when a creditor extends an unsecured credit line to you.

But before you go and open up two or three secured credit cards, you must select the right lenders, too! Did you know some of the high risk lenders offering secured cards can actually end up hurting you rather than helping you?

Think about this for a second: if you obtain a secured card from a high-risk lender, what does this tell other lenders about you?

It shows you are a high risk.

The key is to open a secured card from a mainstream lender — not a high-risk lender. Now keep in mind that opening up a few secured credit cards, making purchases and paying bills on time is a step in the right direction, but it does not address the current problem:  your credit reports.

Did you know that by law you are entitled to receive one free credit report from each of the major consumer credit agencies every 12 months? You can obtain your free reports at

Review your reports and start repairing your reports by either working on them yourself or hiring a reputable credit restoration company.

Remember, it does not have to take a long time to put your credit problems behind you. Once you begin establishing new positive payment history, maintain at least three actively reporting trades and begin repairing your credit reports, you can restore your good credit ratings and scores.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the Community, and All His articles and blog; Business Credit, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.


Thanks for sharing this post with us. Credit Profile Numbers
I got a good experience from this article. As a credit report company manager i like your thought...Thanks free credit report
Make sure that the credit repair agency you choose to work with is reputable. Too many of these services will use your desperation to make money.
Paying your bills on time and keeping your utilization rate below 30% is great advice. You also should limit your inquiries to once every 6 months (10% of your credit score) and establish a Mix of Credit, which means both installment and revolving accounts.
How long will it be before your credit is in good shape after starting to rebuild it?
The key is to establish at least three positive trades actively reporting on each of your reports with Equifax, Transunion and Experian. Actively reporting means you’re making regular payments; a loan that’s paid off does not count.
The first thing you want to do is knowing what is still dragging your scores down, then you can start working from there. If there are still outstanding derogatory items that have been charged off, you may want to start with those and see if you can negotiate paying them off. Most times you could settle those for pennies on the dollar. It is very important to get rid of anything negative first, and the only way to find out is by ordering ALL your credit bureau reports to know what is in there. Cleaning up your credit isn't hard, the worst thing you can do is not doing anything at all.
For me the best thing to do is to plan the budget by keeping some money for hard times. Avoid unwanted loans. Try to clear the credit if any, slowly even helps.

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