A bad credit rating can be the result of poor decisions or bad luck. Either way, late payments or collections can remain on your credit report for seven years, affecting your credit score and ability to obtain a favorable interest rate or even get credit at all, according to MyFico.com.

Fortunately, you can work on rebuilding your credit. Here are some tips:

  • Check your credit report. You’re entitled to a free report once a year from all three major credit reporting agencies (Equifax®, TransUnion® and Experian®) through annualcreditreport.com. Review your report and contact the credit agencies immediately if you find errors. 
  • Pay bills on time every month. Even if you can pay only the minimum, a record of on-time payments helps improve your record. More recent payment histories will weigh more heavily on your credit score than older information.
  • Contact creditors if you’re behind. If you can’t pay the minimum, talk to your creditor to see if you can negotiate a smaller monthly payment. Often creditors would rather lower the amount due each month than hand your debt over to a collection agency. You may also consider pursuing personal finance counseling, which can help you get back on track.
  • Don’t open new accounts. Although you may be tempted by store cards that offer discounts and other perks, they generally have very high interest rates—often 20 percent or more. You’re better off sticking to one low-interest-rate credit card than charging to multiple accounts.
  • Don’t close old accounts. If you have older accounts that you’ve paid off but no longer use, leave them open. Lenders look at how much credit you have available and the length of your credit history versus how much you owe, so these will help your available credit number.
  • Pay off fines. Even small outstanding debts such as library fines and speeding tickets could damage your credit rating.

We Have the Resources You Need

Rebuilding your credit takes time and patience, but Navy Federal can help. If you’re considering a debt consolidation loan to reduce your total monthly payments and interest charges, visit Navy Federal to explore our loan options. You may also want to consider transferring existing high-interest-rate credit card balances to a low-rate Navy Federal credit card.

What's the Difference Between Credit Reports and Credit Scores?

Credit Report Credit Score

Detailed information about your accounts, including the amount of credit you have available, the number of credit cards and other loans, how long the accounts have been open, payment history, credit inquiries and bankruptcies. 

A three-digit number calculated using the information supplied by the credit reporting agencies. This number indicates the likelihood that you'll pay your debts in full and on time. 
Credit reporting agencies obtain this information from lenders and public records. These are linked to your personal information such as place of employment, social security number and birthdates.  Credit scores are used by lenders to determine whether you'll qualify for a loan and, if so, your interest rate.