A common misconception is that people who file for bankruptcy or who have other financial difficulties will have a bad credit report for the rest of their lives. This simply is not true. It may take a few years to rebuild your credit, but can be done.

The first and most important step in rebuilding your credit is to make a budget. Take a realistic look at your income and monthly expenses. Then take a look at how much you actually spend each month. Each time you spend a dime should be recorded, right down to the pack of gum you bought at the gas station. There may be drastic difference between what you spend and what you should be spending. In that case, it is important to make a budget to help you realize how much money you actually have and to allot it for the important things. A well thought out budget will keep you on target for remaining in the black.

Next, you should obtain a copy of your credit report by contacting your credit bureau. The three main ones are: Equifax, Trans Union, and Experian. You may obtain a free copy of your report only if you meet the following conditions. (Note: If you do not meet these conditions, you should not pay any more than $8.50 for your report.)

• You request a copy of your report within sixty days of being denied credit, as in applying for a credit card.
• You are currently unemployed and looking for work.
• You receive public assistance.
• You believe your file could contain errors as a result of fraud.

When looking at your report, you should make sure that the information on it is current and correct. This includes your address, place of employment and checking account number. You may request that the credit bureau add more instances of bills you have paid on time to show a more positive credit report. Send the credit bureaus a recent account statement and copies of canceled checks to show your payment history. The bureaus do not have to add this information, but in many cases, they will.

Something important to remember about rebuilding credit is that you must use credit to create credit. Creditors need to see a positive shift in your report, meaning, they need to see that you are paying your current bills on time. A way to do this is to have one credit card and buy on it monthly. The purchases should be small so you can pay them off each month and avoid interest charges. Make sure, though, that this way of creating your credit does not actually destroy your credit again. Be mindful of how you spend.

As far as credit cards go, it is important to have more than one, contrary to what you may think. Creditors like to see that you can handle having more than one credit card account open at a time and be responsible about paying them off. A bank card, a department store card, and a gas card should be fine.

Keep in mind that it can take a couple of years to rebuild your credit. Be patient and take your time. If you would like to discuss options in a free case evaluation, feel free to contact our office. We'll be happy to help.