credit cards

3 steps to do-it-yourself credit repair

Unlike plumbing or electrical work, credit repair doesn't require a pro. Focus on a few key areas and you'll see your credit score improve along with your chances of getting a loan with good terms.

First, fix any errors on your credit report by filing a dispute with the credit bureau along with documentation that proves your case. Mistakes are common. A 2004 report by the U.S. Public Interest Research Group concluded that almost four in five credit reports have an error. By reporting and correcting key mistakes such as nonpayment on a debt or accounts that aren't yours, you could easily boost your score by more than 50 points.

Next, make a commitment to pay your bills on time, says Clarky Davis, who writes the Debt Diva blog for CareOne Credit in Columbia, Md. "That's one of the easiest and most important places to start since it's the most heavily weighted part of your score," she says. Sign up for automatic payments to make money management easier and to prevent mistakes.

Finally, start reducing your debt. At first, you may have to stop digging yourself deeper into debt. Start paying off your credit card debt systematically but don't close the account. Stash the credit card away in a safety deposit box but keep the line of credit open. Your credit utilization ratio -- the amount of credit you use compared to your limit -- is a key component of your credit score. Improving the ratio will boost your score, says Liz Pulliam Weston, MSN Money columnist and author of "Your Credit Score."

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