- 1). Obtain a free copy of your credit report from AnnualCreditReport.com (see Resources). This federally mandated website offers a free report from all three credit bureaus--TransUnion, Equifax and Experian. Also pay for a copy of your credit score, also known as a FICO score.
- 2). Create a clear financial goal. Use your credit score as a benchmark. FICO scores range from 300 to 850. Poor scores are those below 600, and any score above 720 is excellent. Set a FICO goal: For example, if you are currently at 650, shoot for 750.
- 3). Look for easily fixable items on your credit report. These may include small charge-offs and collection accounts. Pay these first, as they are the most damaging. Next, bring any accounts current that are past due. Then bring any accounts that are over-limit under the credit limit threshold.
- 4). Review three months of your bank statements. Create a new budget based on cuts in discretionary spending. Some things you can easily cut are entertainment expenses, eating out expenses and unnecessary shopping. Doing this will free up additional disposable income.
- 5). Pay off accounts with the highest interest rates first. Pay minimums on all other accounts and use all your extra funds to pay down the high-rate card. Repeat this process until all your accounts are paid in full. This may take months. However, with the additional funds freed up from spending cuts, it will be faster.
- 6). Use all accounts sparingly. For example, you might purchase all gasoline with one card, do online shopping with another and put travel expenses on another. Cancel some credit cards if you have more than three. Keep the accounts that have the best credit history and lowest rates.
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