How To Repair and Improve Your Credit Score

What Is A Credit Score
The Big Three Credit Report Agencies
The Credit Repair Process
Setting A Budget And Goals

What Is A Credit Score

More importantly, what is a credit report?

Simply, a credit report is your history of borrowing and repaying loans. It includes information about late payments, and bankruptcy, but it also includes information about accounts paid in full, accounts paid on time, and the like.

When you go to your bank to see about getting a loan (for whatever you desire), they run your credit history. They then analyze this history, and make a determination of whether you would be a ‘good’ borrower. (This is only one factor which creditors consider. There are three main factors, and we will cover each one.)

Image of credit reportThe second factor the bank will consider, is your credit score. Now, this can be one of three scores, but most creditors focus on the FICO score (we will cover the three different scores in a following section).

You know what a credit report is, but we are still up in the air of what a credit score is. Well, according to, a credit score is a number (typically 350 to 850) based on a statistical analysis of your credit files, that in theory represents your creditworthiness, which is the likelihood that you will pay your bills. A credit score is primarily based on credit report information, typically from one of the three major credit bureaus: Experian, TransUnion, and Equifax. (More on these three bureaus later.)

The higher the number, the less risk you present to the creditor, and the most likely you are to get the loan (also the lower your interest rate will be). If you have a low credit score it’s very likely you would only qualify for bad credit loans which carry higher interest rates.

Now, I do not want to bore you with too much information, but I do want you to realize the importance of having a good credit score and good credit report. In fact, this is the reason you are reading this report.

If you want to have a nice house or nice car, then you need a good credit score and history. But, this is not the only benefit of a good credit score… it has a greater importance (one that is not tied to earthly materials).

If you want to better yourself by getting a higher paying job… Well, nowadays employers are checking the credit history of their applicants. And, if your credit score is low, or you have a bad credit history, then you kiss the job good-bye. They WILL NOT hire you if your credit score is too low.

Why are companies doing this? Well, they want only the best people working for them, and if you have incurred a higher debt than you yourself can pay off, then why should they trust you to make important decisions within the company?

Yes, these companies will also look at your credit report (even if you have a good credit score). Why? They want to see if you have ever filed for bankruptcy. (Bankruptcy will stay on your credit report for 7 to 10 years – even if you have a good credit score.)

But, if you follow the advice I give you, then you will not need to file for bankruptcy. Instead, together we will rebuild your credit… the right way.

Oh, and before I forget… it is EXTREMELY important to know what is on your credit report. Even if you have a credit score of 750, you still need to regularly check your credit report.

Why? For the simple reason that there could be errors within the report. And if there are errors in the report, you can file a claim to have them fixed (and I go over this in a later section).

Also, another reason would be identity theft.

I am sure you have heard the horror stories associated with identity theft? You know, where someone gets a hold of your personal information (illegally), and uses that information to buy themselves:

  • Gasoline for their car (which they also bought via your credit).
  • An RV, so they can take their family camping.
  • Plane tickets, so they can take their family on vacation (oh, also the hotel costs, the rental car).
  • What good is a vacation without money to spend? So, they also got a credit card (in your name). This way they can eat out at luxurious restaurants and take the kids to an amusement park while on their vacation.

There are so many scenarios, and they have all happened to people just like you. In fact, maybe your credit is bad because of identity theft?

Well, if you keep on top of your credit history, and you find errors or you discover you have been a victim of identity theft, then you can file a claim … And I will show you exactly how to do this in the section: Identity Theft.

But before you can file a claim, you must know if you need to file a claim. Otherwise, you will be just like the three blind mice – going around in circles getting nothing accomplished except getting your tail cut off.

The only way you will know if you need to file a claim is to actually view your credit report.

But how can you do this? Well, in this next section I am going to cover not only the differences between the three credit bureaus, but how you can obtain your credit report for free.

The Big Three Credit Report Agencies

Earlier, I mentioned the three credit bureaus: Experian, TransUnion, and Equifax. Before you can begin to rebuild and repair your credit, you must know and understand who these companies are and what they do.

The oldest being Equifax, and the largest being Experian … all three companies have differences, and it is important to know what these differences are. However, we will only briefly discuss one of the differences, the crucial one – the calculation of credit scores.

Three credit reporting agenciesEach company uses a different method to calculate a credit score. For instance, Equifax uses the ScorePower and Experian uses the PLUS score. But, in order to obtain a more unbiased score, most financial companies will use the FICO (Fair Isaac Corporation) score.

The FICO score is created by combining all of your credit information from all three credit bureaus (Equifax, TransUnion, and Experian), and putting that data into FICO’s proprietary algorithm, which then produces a credit score ranging from 350 to 850.

This is what your bank or lender will use (along with other data on your credit history) to determine your eligibility for a loan.

NOTE: [This is also what a potential employer will do when determining if they will or will not hire you.]

Therefore, it is EXTREMELY important that you get (and review) your credit report from each of the main credit bureaus, and that you also obtain your FICO score.

But how can this be done?

Great question to ask. Experian, Equifax, and TransUnion are bound by law to give you one free copy of your credit report each year. All you have to do is ask.

However, there is a certain procedure you must follow in order to obtain your free credit report … and none of these procedures involves using third-party companies that will charge you for your credit report.

Instead, you can request your free credit report in one of several ways:

  • Online at the credit bureau’s website.
  • You can call the credit bureau.
  • Or, you can mail your request.

I would suggest using the online method when available, but you can use the method which bests suits you. Here is a list of the credit bureaus and how you can request your free credit report.

Official Website:
Equifax Credit Report Customer Service:
Equifax Address:
Equifax Information Serrvices, LLC Disclosure Department,
PO Box 740241, Atlanta, GA 30374-0241
Or call: 1-800-685-1111

Official website:
Experian Credit Report
Experian Address:
Experian, National Consumers Assistancce Center,
PO Box 2104, Allen, Texas 75013-2104
Or call: 1-888-397-3742

Official Website:
TransUnion Credit Report:
TransUnion Address:
TransUnion, Consumber Disclosure Center,
PO Box 2000 Chester, PA 19022-2000
Or call: 1-800-916-8800

Once you have your report in your hands, we can move forward and work towards getting your credit repaired and your debt wiped away.

Can you feel it? The feeling of no longer having collection companies calling you 9 to 10 times a day? You know, that feeling you get from being debt free?

Well, you are one step closer to that goal. But, we need to find out WHAT your credit score is. And, since the FICO is the most widely used credit score, you need to know what it is.

To do this, you will need to go to and get your free FICO credit score sent to you. (This website is owned by Fair Isaac Corporation, and is not a third-party website.)

OK, now we are becoming seriously close to becoming debt free and getting your credit repaired.

What you need to do now is look over your credit report (from each bureau), and determine if there are any errors or discrepancies. If there are, then you will want to get those fixed right away… But how will you do that?

Well, if you discover that you just bought a brand new boat with a matching jet ski . . . yet, these items are not in your garage . . . then you will need to follow the steps I outline in this next section.

In this next section, I will reveal to you what you must do if you are a victim of identity theft or if you just have human errors on your credit report.

The Credit Repair Process

Scanning your credit report (which you just printed out), you find that your bank has (in what seems to be an accident) stated that you have two loans out for the exact same amount. Of course, you recognize the loan, and yes, you do owe $3,267 to the bank for a personal loan you took out, but you do not owe it twice and you do not pay double the monthly payment.

Well, you could just ignore it. You pay the bank on time each and every month, and it does not seem to be affecting your credit report. After all, it is not like you are late and it is going against you twice…

Image of bad creditBut you would be wrong in thinking that.

In fact, while you are paying your bank loan on time each and every month . . . your debt-to-income ratio is higher than it should be, and that does affect your credit.

It can mean the difference of getting that loan for that new house, or for that car you want.

But, let us assume you are continuously late on this loan payment. Now, you have TWO late fees against you each and every month. So, if you have been late for the last 6 months . . . that is not 6 late payments noted, but 12 late payments noted.

So, it is important to take care of these discrepancies before they get out of hand and continue to hurt your credit.

That’s not all though!

Further investigation into your credit report reveals to you that you have a condo in Florida, yet you live in California, and you have never even been to Florida. You have been victimized . . . by an identity theft.

You may have never realized this had it not been for you getting your FREE credit report, but since you did . . . you are one step closer to getting this resolved and fixed.

But how? How can you fix discrepancies on your credit history or report identity theft?

Well, I am about to reveal that to you, but first . . .

How can you protect yourself from being a victim of identity theft?

There are many methods that thieves use to get your information, but some of the most obvious are:

  • Bills and credit card (or bank) statements in your trash.
  • Any other important documentation which might have account numbers and/or personal information on it in your trash.
  • Via phishing websites (technique used to steal your personal data via online in a stealthy way).
  • Via worms/viruses/adware on your computer.
  • Calling you and pretending to be a person of authority or a company you are affiliated with – then asking for personal information and/or your credit card number.

So, your first step of rebuilding your credit will be to make sure you can never be a victim of identity theft (Why? Because you do not want your hard work to be ruined by a few seconds of someone else’s time.)

  • Always make sure you shred important documents BEFORE you trash them.
  • Never store passwords on your computer (especially passwords to your online bank account or credit card account).
  • Get a good firewall and anti-virus software for your computer.
  • Never give personal information or your credit card number over the phone unless you initiated the call.

Those are just a few things to keep in mind, but the main antidote is commonsense. And, if you do find yourself a victim, then follow my advice I am about to give.

Now, that you know how to protect yourself from identity theft . . . what if you have already been victimized? Or, what if you already have discrepancies on your credit report?

For identity theft, you will first want to contact the credit report bureaus. You can use the numbers I gave above to do this to place a fraud claim.

Next, you need to report the identity theft to the police. Once you have done that, you will want to get a copy of the police report. Make copies of this document . . . one to file for yourself, and a few more to hand out in case you need to do so.

After you’ve reported the crime to the police and gotten your police report, then you will want to contact the creditor. They will more than likely ask for a police report before they will do anything (this is why you made copies). So, give them a copy of the police report.

Lastly, file a complaint with the FTC (Federal Trade Commission). Why? Well, this helps the law enforcement track down and find the person or persons responsible for your identity theft.

If you just have errors and discrepancies on your credit report, then you can contact the bureaus with the information I gave above. What you will do is file a dispute, and the bureau will investigate the issue. If there is an error, the bureau or bureaus will fix it within 30 days.

You can contact them via phone, or send a dispute letter. If you send the letter, give the bureau 30 days, and if the change has not been made to your report, you need to contact them again.

However, most of the bureaus have made it possible to report a dispute and follow the dispute online. This is the option I would recommend if it is available.

Taking care of any discrepancies or identity theft issues is your first priority when trying to rebuild your credit report. These just might be the only reason your credit is bad, and if it is, then it can be fixed by filing a fraud claim or a dispute claim.

If not, t you will need to work on rebuilding your credit the old fashioned way: setting a budget and goals.

In this next section, I will walk you through how to rebuild your credit from a 400 or worse score back up to a 600 or better score.

Setting a Budget And Goals

Two cars, one huge house (with a huge utilities bill), three kids (who eat constantly), three dogs, and one cat (all of whom eat more than their fair share too) . . .

Bills galore!

All was good, until you added that fourth credit card . . . and then you felt the effects of the economy. You have been late on all your payments for the last 5 months, and one of your credit cards already went into default.

Image of goalsWhat can I do to get out of this slump?

Great question. Simple answer: a budget. Actually, more than just a budget, but goal setting.

You see, if you can determine a set budget, and set small goals that lead to a larger goal . . . then you can eliminate one credit card after the other, all while rebuilding your credit score. (Your credit history will always be what it is, bad . . . at least for the next 7 years. All negative reports on your credit stay on your credit history for 7 to 10 years.) But, you can improve your overall credit, and immediately start rebuilding your credit score and as time goes by, your credit history will improve.

So, before you can set your budget and goals, you need to know HOW much you bring in, and HOW much debt you have.

Add up all of your bills: your car payment, your house payment, utilities, your credit card bills, groceries, credit cards, everything that you are 100% certain you must pay for the month.

Then, you need to add in some emergency money with that budget. Money that will be used for a rainy day . . . you never know when that car might need new tires.

Once you’ve figured this amount, determine what you have left.

OK, let us assume that your bills add up to $2,300 a month, and we put aside $200 for emergency money. That leaves you with $500 left.

Now that we know what your budget will be (hint: you can use Excel spreadsheet to help you keep track of your budget), we can now work on what your goals are – this is when having your free credit report comes into play.

Of course, your main goal is to become debt-free and have good credit, but we need to set some minor goals. So . . .

Sit down and look over the report, and determine what your exact debt is. You should be able to find out the total. Now, we will not work directly with the total, but it is good to keep track of it while you are going through the process of bringing down your debt and rebuilding your credit.

Once you determine the total debt, we can start eliminating certain debts . . . (here is the kicker; once you have paid off an account in full, then it will improve your credit).

Go through and find the one debt you have which is the closest to being paid off (more than likely a credit card). What you will do next is pay all of your bills like you normally would (the house, the car, your credit card bills, etc.) and, with the extra $500… take $250 and put that into a savings account, and use the rest to pay towards the one debt which is closest to being paid off.

NOTE: [Your income and budget will surely vary, but you should follow the same exact principles I outline here.]

What will happen is twofold. On this one account (the one to which you paid $250 extra), you will bring that debt closer to being paid off while at the same time helping your credit score. See, paying a percentage more each month goes to helping your credit score by that much more of a percentage.

Also, the $250 you put into savings will build up. I will explain what to do with this money soon.

Continue to do this until that one account is paid in full. Then, repeat this process for the next debt which is nearest to being paid off.

At this rate, you will not only eliminate your debt faster, but you will help build your credit faster.

Soon, you will be getting to the larger debts . . .such as your cars and house. This is where the money you have been putting into savings comes into effect.

When you get to the larger debts, determine which one is closest to being paid off (just like before), but instead of just paying the $250 and putting the remainder $250 into the savings account, you will take the $250 plus the savings account money (which should be in the low to mid-thousands by this point), and pay it toward the one of the larger debts which is closest to being paid off (most likely, a car).

This will have a dramatic impact on your credit! It will raise it by dozens of points . . .especially if it was enough to pay the debt in full.

However, if it was not enough to pay the debt in full (or even if it was), start putting the $250 back into the savings account, and continue to pay the other $250 on the debt closest to being paid off.

Continue to put the extra $250 into savings until you have accumulated an extra $2,000. Then, take that $2,000 to help pay down the debt which is closest to being paid off.

Again, this will have a huge impact not only on lowering your debt but also on raising your credit score. (And do not forget to keep track of your total debt.)

It will not be long until you have brought most (if not all) of your debt down, except perhaps for your house . . . which, if you continue to follow the same principle above, you will still pay off faster.

Oh, did I forget to mention another great factor about this whole system?

When you pay down a debt, and eliminate it, you can take that monthly payment and add it to that $500. So, let us assume your first debt was a credit card bill of $50.

Well, once you paid down that credit card (while building your credit), then you can take that $50 and add it to the $500 to make it $550 in excess of what is needed for your monthly expenses.

Now you can put $275 into your next debt to pay it off, and put $275 into a savings account.

That is the beauty of the system above – it will reduce your debt and build your credit exponentially.

By following what I have laid out for you, you will have no problem at all becoming debt free.

So, I tell you again . . .

Just imagine what your future will hold when you are finally debt free, or close to becoming debt free. All your financial problems (and burdens), all that stress you have been hoisting around for so long (which undoubtedly causes many sleepless nights for you)… all of that – GONE.

And now you know that it is POSSIBLE. All you must do is sit down, create a budget and set goals. Keep to your budget and goals, and you WILL become debt free before you know it.

Yes. It takes discipline. Yes. It will be a tough road.


You only have to set your mind to it, and follow what I have laid out for you. You can do it . . . You can be one of the few . . . You can become DEBT FREE.



  1. Yes it’s going to be difficult to pay off debt and rebuild your credit if you only have $12 dollars extra at the end of the month. I don’t know if it’s an option but taking on a second job would help you fast track the process. I think the most important thing for you to do right now is don’t accumulate more debt. You’re on the right track just keep digging yourself out one day at a time.

  2. Melissa says:

    Great idea if you have extra money every month. I could figure this out, but we are living in the negative. Nobody could tell us how to fix our credit so we are not always in the negative. When doing a budget with a professional planner, we have $12 left at the end of each month. That $12 is not going to do anything for us except give us some extra gas.

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