8 ways to rebuild your credit yourself and save

By Michele Lerner
Mortgage Credit Problems Columnist

Suffering from a bad credit profile means you may not be able to qualify for a mortgage either to buy a home or refinance your home. If your ultimate goal is a new mortgage, you may need to take credit repair steps first.

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If you are already a homeowner, find out if you qualify for a debt consolidation loan or a home equity loan by completing the form on this page.

Regardless of whether you qualify for a mortgage today, you should still take some of the following steps recommended by the National Foundation for Credit Counseling to improve your credit score.

  1. Check your credit report
    Before you do anything, you really need to know where you stand with potential lenders. When you check your credit report, you can easily spot errors that need to be corrected. If there are any negative remarks such as late payments or high balances, you can begin to address them as well.

  2. Don't pay a credit repair company
    A credit repair company may promise a quick fix to your credit score problems, but legitimate credit score improvements take time.

  3. Pay all your bills on time.
    By paying all your bills on time, you'll avoid late fees and improve your score.

  4. Pay more than the minimum on all credit card bills.
    Even if you can only add $10 to the minimum payment, you should do it to reduce the balance faster.

  5. Stop credit card use.
    Avoid using your credit cards until each balance is at least 30 percent or less of the credit limit.

  6. Try the snowball approach to debt reduction.
    If you can, pay only the minimum on all your bills except for one. Pay everything you can toward that one credit card so you can pay it off as fast as possible. (It is best to pick the credit card that charges the highest interest rate.) Then apply the same technique to the next credit card balance.

  7. Don't apply for a lot of new credit at once.
    If you have successfully paid down your debt and want to start fresh with a new credit card at a lower interest rate, apply for just one.

  8. Consider a secured credit card.
    If your credit cards have all been cancelled and you need to start rebuilding your credit, apply for a secured credit card. Just make sure the credit card company will report your payments to the credit bureaus so your score goes up.

It may take time to improve your credit score, but you may find that repairing your credit yourself saves money and helps you avoid financial hiccups in the future. Once you see improvement in your credit score, you can contact lenders or complete the form on this page to find out if you qualify for a new home loan or a mortgage refinance.

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