What is the best way to fix a completely terrible credit rating?

First, concentrate on the Installment Loans (these are the fixed interest, bigger-ticket items such as home loans and autos, student loans, etc.) getting paid on time - every time. They are weighed more heavily than the Revolving Debts (credit cards).

Your goal is to never be more than 30 days late making a payment for at least the next year to qualify for standard loans/credit cards and for the next two years to qualify for a mortgage.

Your hierarchy when determining who gets paid when (for credit score/rating purposes only), is as follows: Installment debts, revolving debts, non-reported debts (utilities and cell phones). The non-reported debts will not show as late payments on your credit report - however, should you fail to pay them (or make proper arrangements) for more than 120 days (some less), they will go into %26quot;collection%26quot; and will then show up as a bad debt on your credit report.

Should you have open collection accounts on your report, most creditors will want to see them cleared up before they lend you money. They also hit your rating pretty hard when they are newer. The exception is generally with medical accounts, most creditors %26quot;ignore%26quot; these types of collections and will not required them paid off.

When paying off the collection accounts, start with the most recent non-medical items first - they are the ones hitting your credit score the hardest. Always contact the collection agency and broker a deal for yourself. Almost every collection agent out there will take fifty cents on the dollar -or less- if it means you can pay them now. Negotiate the best deal you can by telling them you only have X amount and can send it now, there may be some back and forth, you may have to speak with a supervisor. Always have them send the deal in writing BEFORE money changes hands. When you do not get the deal in WRITING and you send in the money, they will deduct it from the total you owe, tell you that you still owe the rest and say they have no record of making a deal with you. Save a copy of the deal and a copy of your cancelled check (or bank check) - you will need this to get your credit report updated later if the agency fails to do so, and they usually fail to do so. This will show on your report as %26quot;Settled for less than full amount%26quot; - makes no difference to your credit score though, still was settled as far as scoring goes.

Keep in mind that a bad debt will %26quot;fall off%26quot; your report in 7 years. They no longer report it after that time. If it is close, do not bother, use your money to pay down your revolving debt.

Revolving debt (credit cards) look best on your report (and your credit score) when paid on time and: account has been open longer than one year, and the amount you owe is less than half of your credit limit (limit is $4,000 and you owe $2,000 or less), and it actually gets used (even if you just let $100 sit on it while you pay the minimum amount due).

Extra cash gets used to pay bad collection accounts, then pay down your highest balance revolving debts, then pay ahead on your installment loans.

None of these things will save you money. These are merely tactics to quickly improve your credit rating. Then you can worry about how best to use your money.

Huge thing to remember: check your report for incorrect items. Any lender who has denied you credit must legally provide you with a copy of the report they used to turn you down. Usually this is in the denial letter somewhere with 800 number to call credit agency to get report - for free.

Last thing - a bankruptcy will hurt your score badly for the first couple of years, nothing you can do but wait that out. Each lender has a different criteria for handling bankruptcy. It will usually be easier to get a mortgage that a credit card or auto loan after a bankruptcy, ironically. This is because if there were extenuating circumstances, a mortgage department/ bank will typically take that into consideration after 12 or 24 months - other lenders just see the BK and write you off until it has been 5 years or longer. A BK will fall off your report in 7 yrs, too.

What is the best way to fix a completely terrible credit rating?

if you have outstanding debts----pay them off

if you have no debts----get a secured credit card