Credit Repair: Free Guide To Repairing and Building Your Credit»

Credit Repair: Free Guide To Repairing and Building Your Credit

Update:  This credit repair guide has recently been updated for your reading experience.

Do you have overdue student loans, high credit card debt, or perhaps a foreclosure notice? If so, you’re more than likely to have bad credit, and probably thinking about hiring one of those credit repair companies that promise to fix your credit score for a price.

But did you know that everything these firms do, you can do yourself for free? In fact, the FTC says that there’s no better person to repair bad credit than yourself, adding that no one, not even credit repair firms, can legally get rid of negative information from a credit report.

So how exactly can you repair bad credit for free? Check out our ultimate guide below.

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Credit Repair:  Understand What Affects Your Credit Score

Your credit score is a numerical representation of all financial details on your credit report. Today, three main credit bureaus oversee such reports — TransUnion, Experian, and Equifax.

These companies are responsible for disclosing your credit information to companies who want to confirm whether you are creditworthy or not.

To determine your credit score, several factors are taken into account, such as:

Factor #1: Payment History

This is considered the most significant factor that can affect your credit report. In fact, it accounts for 35 percent of your final credit score. Basically, this shows how you pay your bills each month.

That being said, it is essential to settle your balances on time and avoid skipping payments. It will not only ensure a good credit standing but also prevent interest from accumulating.

Your payment history is listed on your credit report through various accounts you have had in the last seven years. These may include loan, mortgage, and credit card accounts.

The records will show how much you have settled each month and indicate any late or missed payments. In some cases, creditors like utility companies mark late payments, ranging anywhere from 30 to 150 days. The later the payment has been made, the lower your credit score will be.

Factor #2: Total Amount Of Debt

Another significant aspect on your credit reputation is the amount of your debt, accounting for 30 percent of your total score. Apparently, the total debt you owe determines whether you are creditworthy or not.

Typically, creditors will take into account your debt-to-credit ratio or credit utilization. For instance, if you have credit cards, they will calculate how much you owe compared to your maximum line of credit.

If you are close to maxing out your credit limit, chances are, your credit score will be affected negatively. Remember, spending your credit wisely and only when necessary is likely to leave a good impression to creditors, thus boosting your reputation.

Factor #3: Length Of Your Credit History

It’s common knowledge that the longer your balances remain unpaid, the bigger the risks of acquiring bad credit. In fact, the length of your credit history takes up to 15 percent of your total credit score.

Typically, creditors will take a good look at your previous accounts and how long they have been opened, including loans and credit cards.

If your history shows that you can repay your balances during the required period, you are likely to have an excellent reputation to these lenders and might easily get approved the next time you apply for a loan.

Factor #4: New Credit Applications

While it’s true that applying for multiple credit cards or loans can be tempting, it also has its downside, especially on your credit report. Also known as Inquiries, these credit applications account for 10 percent of your credit score.

Every new account you have opened or applied for in a year take off about 5 points from your score. That being said, it is best to apply for new accounts wisely.

Factor #5: Types Of Credit You Have

The final 10 percent of your credit score is based on the types of credit you have. There are two major types of credits; revolving credit (e.g. credit cards, retail cards) and installment loans.

While both types of credit affect your credit report, the former is believed to hurt your score more. Revolving credit doesn’t really show your full potential of paying off a debt.

On the other hand, installment loans usually have an asset attached to them, such as a house or a car, which can be a basis of your financial capability.

The same goes for student loans, where it is considered more favorable than credit cards as it serves as an investment in your future earning capacity.

How to Fix Negative Items On A Credit Report?

There are different items appearing on your credit report that can significantly affect your score. These items range from positive and neutral to negative ones.

Each item will have different effects on your report, depending on its nature.

For instance, positive and neutral items will reflect on your credit report indefinitely. However, negative ones will have a limited time frame on your report and diminish with time.

That being said, you can expect it to be removed, especially if you start working on improving your credit score. Here are some of the negative items that might appear on your credit report.


This item is a result of a creditor selling off your debt to a debt buyer after deciding it is not collectible anymore. These debt buyers, on the other hand, will attempt to collect the amount you owed with additional interest and other costs, such as court fees and late charges.

Charge-offs usually stay on your credit report for a whopping seven years and 180 days from the original date of delinquency.


Paying off your balances through a debt collecting agency doesn’t necessarily mean that you are solving your credit problem. In fact, it might even make things more complicated by resetting the start date from when it was first reported. In return, it may hurt your credit score further instead of boosting it.

It is also worth noting that these items tend to last on your credit report for up to seven years, almost similar to charge-offs.


Repossession doesn’t necessarily take away your debt. While it’s true that the item or property has been pulled out of your possession, you are still responsible in settling any remaining debt in full.

This is regardless of whether it’s already listed on your credit report. Similarly, repossessions last for seven years on your report.

Late Payments

If you are behind on your payments, expect to see a negative impact on your credit score. This is despite your effort to catch up on what you owe. Any payment settled more than 30 days after its due date will likely appear on your credit report.

Some lenders, on the other hand, are considerate enough not to report a past due payment until a second one becomes overdue.

This is to pave the way for good customers who might merely forget the deadline and settle their balances immediately next month. Late payments may appear on your credit report for up to seven years as well.


For some unforeseeable circumstances, some of us might be forced to file for bankruptcy. When that happens, it will appear on your credit report for up to 10 years, and your score will inevitably take a blow.

Unpaid Taxes

We all know that unsettled taxes have consequences, particularly to your credit score. In fact, under federal law, unpaid tax liens can stay up on your credit report indefinitely. On the other hand,  those that are eventually paid can last up to seven years.


Another factor that affects your credit score is foreclosure. When you have such history, it will reflect on your credit report for up to seven years. Fortunately, you don’t have to wait long to buy a new house.

Once you’re financially capable again, you can qualify for a mortgage as early as two years.

Here’s How Bad Credit Affects You

Having bad credit can negatively affect you more than you could’ve imagined. As you’re maxing out your credit cards and falling behind on your bills, your credit score starts to plummet, which in return can make your life extremely difficult.

Here are some of the most common damaging effects of a poor credit score that might require you to get bad credit loans.

Credit And Loan Applications May Not Be Approved

Your credit score has a direct effect on securing approval for future loans and credit applications. In fact, creditors consider borrowers with bad credit as high risk, thus increasing their chances of getting denied.

This is bad news for those who are seeking financial assistance for emergency loans or other purposes.

Tip:  Read our guide on bad credit loans here.

Higher Interest Rates On Approved Loans

In some cases, borrowers do get approved for a loan with bad credit. However, they usually end up being subjected to a higher interest rate and more restrictive terms.

Typically, lenders consider those with a low credit score as a riskier borrower as compared to someone with a better score.

In fact, Bank Of America reiterated that a higher credit score could make you qualify for better mortgage interest rates, adding that some creditors may even lower their required down payment for a new home loan.

For instance, if the creditor finds your credit score questionable, you are likely to be required a down payment of 15 to 20 percent of the total amount of a house.

Meanwhile, if you have a good credit standing, chances are, you will only be required to pay 5 percent down on the same house.

Difficulty In Renting An Apartment

You may not know it, but even landlords do credit history check of potential tenants. If you have bad credit, you’re more than likely to get denied an apartment lease, as a poor credit score is synonymous with having a higher financial risk.

Landlords are also wary of tenants with a history of late rent payments, delinquencies, bankruptcies, and foreclosures on their credit reports.

Trouble Landing A Job

Bad credit can also affect your chances of landing a job, especially those in the upper management or financial industry.

Usually, these professions require potential employees to have a strong credit history. Items such as debts or a history of bankruptcy could prompt employers to turn down your application.

That being said, it is important to maintain a good credit history as much as possible.

Here’s How To Repair Your Credit For Free

It’s easy to get overwhelmed with all the adverse effects of bad credit. Unfortunately, many find it hard to deal with efficiently. Some even resort to hiring credit repair firms, which could get really pricey.

But did you know that there’s a lot of things you can do on your own to fix your credit score?

Before falling for these “too good to be true” promises of erasing your bad credit overnight, consider following these simple steps that can help you repair your credit for free.

Credit Repair Tip #1:  Access Your Credit Report For Free

Did you know that you can access your credit report for free?

By using, you can have a look at your report and obtain a copy completely free of charge. Just provide some personal information, answer security questions to verify your identity, and you’re good to go.

You can even request a hard copy of your report to be delivered to your doorsteps.

All the data in your credit report comes from three credit reporting agencies– Equifax, Experian, and TransUnion. Once you have the report, take time to review and keep track of any incorrect details.

Keep in mind, you can only request your credit report from once a year.  It may be beneficial to use a credit monitoring services, which many also include a detailed report similar to

Credit Repair Tip #2:  Dispute Errors on Your Credit Report

In case you find any error on your credit report, it is your right and responsibility to dispute them and have it cleaned up.

Make sure that your identity information, such as your name, birthday, and social security number are accurate to avoid any conflict. You should also review the list of your credit history, including your credit cards, outstanding debts, and major purchases.

If you see any mistakes, even small ones, be sure to highlight them and gather supporting evidence to back up your claims.

Once everything is secured, you can coordinate with the specific credit reporting agency that shows an error and explain the mistake. Be sure to present your proof and other supporting documents to make your point clearer.

Here’s a Sample Credit Dispute Letter You Can Use

{Your Name}
{Your Address}
{Your City, St ZIP}
Your Social Security number: {XXX-XX-XXXX}
Your Date of birth: {XX/XX/19XX}
P. O. Box 740241
Atlanta, GA 30374-0241


Dear (credit bureau name),

Please provide evidence that the following account below is factual and that it belongs on my credit report. Also please provide evidence that my rights have not been abrogated. If no record exists, please immediately delete this damaging information from my account.Your Account Name

Your Account #######
Your Name

Note: The above letter works for all three credit bureaus. Replace the credit bureaus name & address based on the information listed below.

Credit Bureau Contact Information

Equifax Dispute Address
P. O. Box 740241
Atlanta, GA 30374-0241

Experian Dispute Address
2220 Ritchey
Santa Ana, CA 92705

TransUnion Dispute Address
P. O. Box 1000
Chester, PA 19022

Credit Bureau Phone Numbers
Experian: 1-888-397-3742 –
TransUnion: 1-800-916-8800 –
Equifax: 800-685-1111 –

Another important thing you can do to fix your credit is to plan a monthly budget and stick to it. Some people tend to spend more than they can afford each month, thus continuously hurting their credit standing.

But if you start working on your expenses now, you can definitely fix your credit score in no time.

To do this, start by paying all your bills on time. As much as possible, pay every debt and avoid applying for new credit, especially if you still have an outstanding balance.

It also wouldn’t hurt to estimate your monthly expenses and subtract it from your regular monthly income. If you feel like your earnings for the month are not enough, be ready to make adjustments in your spending habits.

Credit Repair Tip #4:  Build Up Your Credit Score Over Time

Once you start repairing your credit score and recover your financial footing, continue building up your good standing over time. One of the easiest ways to do this is by maintaining low utilization on your credit card.

According to Forbes, people who spend below 10 percent of their credit limit tend to have good credit scores. That being said, it is essential to monitor your spending and avoid unnecessary expenses. You should also settle your statement balance in full and on time each month. Eventually, your good performance will reflect on your credit report and improve your score.

Remember, repairing your credit doesn’t have to cost a fortune. With proper knowledge and the right amount of patience, you can recover from bad credit and improve your reputation.

It’s never too late to make positive changes, regardless of how poor your credit status is. Once you’re finally able to fix your credit score, be sure not to repeat the same mistakes again.

Credit Repair Tip #5: Take Out a Small Loan

It may sound counter-productive, but taking out a small loan could potentially increase your credit score. This approach tends to work best for those that have maxed-out credit cards or wish to consolidate debt.

If you already have good-to-excellent credit, this approach typically won’t help you much. You’ll need to weigh your pros and cons when using this method.

If you choose to go this route, there are a few things to keep in mind:

  • Never miss a late payment. Maintain a positive payment history
  • Pay more than the minimum payment every month
  • Reduce the balance of the loan by 70% as soon as possible

Credit Repair Tip #6: Don’t Open Too Many Accounts

It’s obvious you need accounts to establish and maintain credit. However, it is possible to go overboard. When you choose to open multiple accounts in a short time-frame, this is potentially a red flag to creditors. And it can also bring your credit score down.

Credit Repair Tip #7: Don’t Close Old Accounts

Especially if a credit card account has good history. You want to keep accounts open that have positive credit history.

There are a few caveats to this tip. If the credit card account in question costs you more to keep open, keep these tips in mind:

  • Negotiate annual fees with the creditor
  • Downgrade to a credit card with lower annual fees (from the same card issuer)

Credit Repair Tip #8: Apply for a Secured Credit Card

Credit cards for bad credit can help you re-establish credit history. With a secured credit card, you’ll often pay an annual fee and will need to deposit money onto the card.

Don’t expect a huge credit limit and don’t spend frivolously with this card. Its sole purpose is to create a positive credit history profile. Pay the balance off every single month.

After 3-6 months of this, ask for a credit limit increase. After 3 more months of this, ask for an unsecured credit card. Remember to keep the secured credit card open and continue to use it!

Credit Repair Tip #9: Increase Your Credit Limit on Existing Cards

Credit utilization accounts for 30% of your credit score. Credit utilization measures the amount of credit you are using.

For example, if your balance is $600 and your credit limit is $1,000, then your credit utilization for that credit card is 60 percent. A good rule of thumb is to keep your credit accounts below 30% credit utilization.

In the event you can’t pay your card/s down below that ratio, consider contacting your credit account and asking for a credit limit increase.

Depending on the credit limit you’re given, you could easily bring the utilization down to 30% or below — without having to pay the balance down.

Credit Repair Tip #10: Pay Down Existing Debt

This tip is a bit more obvious, yet is highly critical part of repairing your credit. Here’s a tip that can help you pay those balances down, without stressing too much about it.

When we look at our debt as a whole, it can quickly overwhelm us…and even drive us into full-blown panic mode.

That said, create a spreadsheet in Google Drive or Excel that lists all of your existing debt. Be sure to create columns for balance, interest, and APR. There are a few ways you can tackle this:

  • Pay off cards with the lowest balances first
  • Pay off cards with the highest interest rates first

Either method works, as long as you are diligent. It’s simply a matter of which method will work best for your situation.

Whichever method you choose, keep this in mind: once you pay off a card (or pay it down to or below 30% credit utilization), take the payment you’re using for that card and apply it to the next one.

This is often referred to as the Debt Snowball method. Here’s a handy debt calculator you can use.

Credit Repair Tip #11: Negotiate a Lower Interest Rate

Did you know that you can negotiate a better interest rate on your credit cards? Here’s how to do it:

Get a manager on the phone. When approaching this, you don’t want to waste time talking to the wrong person. When you call, ask to speak with a manager ASAP. Once you have a supervisor on the phone, explain what you are trying to achieve.

Let them know you are getting offers from other credit card companies that have better terms.

And, that you’d prefer to continue doing business with them, if they can find a way to match or beat the terms other credit card companies have offered you.

It may not always work, but in many cases it can. Especially if you’ve been making on-time payments and have a great relationship with them.

Credit Repair Tip #12: Pay Early and Pay Often

One of the best ways to skyrocket your credit score is to pay the full balance off every month. However, not many people can afford to do that. If that’s the case for you, consider paying a portion of the balance off — whatever you can afford.

As long as it’s more than the monthly minimum, it will have a positive impact on your credit score and increase the chances of a credit limit increase.

Don’t Fall for Credit Repair Scams

Here’s how to know if a credit repair company is ripping you off:

  • If the credit repair company pressures you to pay up-front fees, it’s a scam
  • If they promise to remove negative information regarding your credit report, it’s a scam
  • Further, if the credit repair company refuses or avoids explaining your rights to you, it’s a scam
  • They tell you to not contact credit reporting companies?  It’s a scam
  • Were you given a copy of the “Consumer Credit File Rights Under State and Federal Law?  If not, guess what…it’s a scam
  • Were you given a copy of the contract to view before signing it?  No? It’s a scam
  • Does the contract contain the following information?

    – How much you are being charged

    – Services the credit repair company is performing on your behalf

    – The time period required to perform the credit repair services

    – The business name, along with business address of the organization

    – A statement letting you know you can cancel the contract within three days

  • Credit repair companies cannot ask for payment before the services have been performed
  • The credit repair company promises to remove accurate information from your credit report
  • The company promises to create ​or asks you to create, a “new” identity
  • You’re asked to sign a form waiving your rights under the CROA

What to Do If You’ve Been Scammed By a Credit Repair Company

Credit repair scams are on the rise. Unfortunately, many consumers still fall for such scams, in the hopes that their credit scores will improve.

If you’ve been scammed, don’t let rogue credit repair companies get away with it. There are a few steps you can take to report them.

You can start by reporting the bogus organization to your local state attorney general.

Need help locating your local state attorney’s office?

Visit National Association of Attorneys General’s to find your local office.

You can follow this up with the recommended action steps below:

Report Them to the Federal Trade Commission

The FTC does not mess around with this type of complaint. Visit to start the complaint process.

Report Them to the Better Business Bureau

The BBB is not a government organization. They are a private, non-profit that simply collects information and business ratings.

However, submitting a complaint will do a few things for you:

a) The bogus credit repair company will be forced to reply (provided they are a member of the BBB).

b) Allows your review to be seen by others online, which will limit the number of business prospects for that company.

File a complaint with the BBB here:

Report Them to the Consumer Financial Protection Bureau

The CFPB is a U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly.

Once you submit a complaint, they forward the complaint to the credit repair company in question and can usually get a response within 15 days or less.

Submit a complaint here:

Leave Reviews on Social Platforms

Often times, leaving reviews on 3rd-party platforms can help.  If the company values customers, they will often times work with you to make things right.  

In the event they do not consider your request, your negative review can help others avoid the same pitfalls as you have.

  • Leave a Review on Google
  • Leave a Review on Facebook
  • Leave a Review on Yelp
  • File a complaint on

Additional Solutions to Repair Your Credit

If your debt is rising more than your income at a steady rate, it may benefit you to learn more about a personal loan or balance transfer credit card.

Often times, consolidating your debt through either option can significantly reduce your interest rates and monthly payments, provided you stick to the payment arrangements.

You can also seek help from a nationally accredited credit counseling service. Many agencies are non-profit and the cost to use them are minimal.  Additional suggestions:

What credit repair tips have you used that work? Let us know in the comments!

By Brian Allen

Brian Allen has been helping people make smarter financial decisions for over 10 years. As the Editor-in-Chief for Goloans, Brian writes about sage financial advice, "how to" articles, and reviews about lenders and creditors.

View all of Brian Allen's posts.

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