A bad credit record can make life difficult. So many people have had money trouble because of the fluctuations in the economy. However, there is good news for those who have bad credit or a bad credit history. You can take certain steps to repair your credit to a point where you will be eligible to apply for credit again and where you will be in a better position financially.

Step 1: Do Some Homework

Before you get started with this mission, you should do some homework. Read up on the different credit unions and what they do. Understand what makes up your credit score and why you may have a bad score. Gather the contact information for the credit unions as you may need them at a later step in this process. Read up on your rights and what you can do if you find errors on your credit reports.

Step 2: Request Your Credit Reports

Request your credit reports from all the credit unions. You will find that not all of them have the same information and they may also show incorrect information. Not all credit companies report to all the unions and some don’t report at all, so your credit record may be incomplete in some aspects. Use the three reports to compare and get a picture of your financial history.

During this step, you should look closely at the personal information indicated. Check the spelling of your name, your address, big purchases, etc. Note anything that is incorrect or should not be there at all.

Step 3: Correct Mistakes or Incorrect Information

If you pick up errors in Step 2, now is the time to fix. If you did your homework in Step 1, you will have the contact information for the credit unions and you will know how to go about correcting an error on your report. Take the time to sort these errors out before you continue with the steps.

Step 4: Pay Your Bills on Time

The single most important thing that can improve your credit score is paying your bills on your time. This is not only a good habit but one that will make your financial life a lot easier if you need to apply for credit again. Make sure to catch up on bills that have fallen behind as soon as you can. Pay every bill on time from now on out. This will make a big difference on your credit score. You may only see changes in two or three months, but it will show.

Step 5: Pay Off Your Debt

The next big step is to start paying off your existing debt. This is especially important for credit card debt. The sooner you get rid of the debt, the sooner your credit will be repaired. Not only will this action help improve your credit score, but it will also take away the stress of carrying so much debt.

Step 5: Don’t Try and Apply for More Credit

It is very important that you don’t try and apply for credit if you are trying to repair your credit. An application for credit will reflect badly on you and possibly damage your credit rather than help you. Try to find another way around your money problems as far as possible.

Step 6: Get a Structured Credit Card

Part of a good credit history and score is different types of credit and the duration of your credit history. These things can help improve your score. Try to get a secured credit card from your bank. A secured credit card requires that you have a set amount of money put aside as collateral for your credit card. This will give you the first step to an improved score.

Once you have a secured credit card and you have handles it responsibly for several months to a year, you can apply for an unstructured credit card. This is the next step to credit repair. Alternatively, you can apply for an instalment loan. An instalment loan has a set amount and a set time period to pay it off. An example is a car loan.

Step 7: Adjust Your Spending Behavior and Budget

Once you have taken all the previous steps and started to repair your credit, you need to change your spending behavior. Whether spending too much is what got you into trouble or not, we can all improve our spending habits. The first thing you should do is draw up a budget. Your budget should clearly indicate all your bills, your loan repayments, and other monthly expenditures. Once they are sorted, you can divide the remainder of your income between savings and social events, etc. If you follow your budget, you should stay on track and not get in trouble again.

Step 8: Don’t Let it Happen Again

Once you have repaired your credit, you should try and keep it that way. Establish good financial habits and stick your budget. Get your debt paid off as soon as possible and keep paying your bills on time. It is easier to keep good habits than it is to make them habits. Don’t allow yourself to fall into the same traps again.

Credit repair is not impossible and you can do it yourself. Always remember that knowledge is your best weapon. Step 1 of this process is very important. The more you know the better prepared you will be. Repairing your credit will take several months and sometimes years if your history and score are really bad. However, don’t give up hope. If you stick to your new and healthy financial habits you will reap the benefits.