Repairing vs. Rebuilding
 What's The Difference Between Repairing Credit and Rebuilding Credit?
Depending on your personal credit situation, you may find it necessary to rebuild your credit rather than repair it. The Fair Credit Reporting Act gives you the right to dispute any items on your credit report that are inaccurate, missing, or not up to date. Taking advantage of this right constitutes "credit repair".
One can repair their credit by disputing negative items and eventually working to have them removed from your credit report. The most common instances of credit repair involve:
- Late Payments Not Updated
- Missing Payments Not Credited
- Paid Collections Not Updated
- Paid Tax Liens Not Updated
The other means by which one repairs their credit is by addressing negative items that are correct on the report. This usually involves working with credit issuing companies and lenders to make arrangements for payments owed to show that past problems have been resolved. Although an item like a collection or bankruptcy stays on your credit report for a while, it is better to show that the issue has been resolved and closed rather than remaining open.
Rebuilding credit involves taking steps that outweigh the negative items as you wait for them to fall off your record. What's most important is not repeating the same bad habits that got you in this situation in the first place. Managing spending is key to being able to make payments on time. The more time that passes without negative incidents the better!
Another rebuilding strategy involves obtaining new sources of credit and keeping clean records. Industry experts recommend having about three sources of credit active and in good standing at all times. Examples of these include mortgages, car loans, and credit cards. Try not to run credit card balances up to or anywhere near the pre-set spending limit. A maxed-out credit card can hurt your credit utilization scores and negatively impact the credit you're trying to rebuild. (Learn More About How Credit Limits Affect Your Score).
Law firms specializing in credit repair are a good resource if you need help determining which strategy will work best for your situation. Read our featured article for a comparison on using a specialized law firm versus the do-it-yourself method.
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