Question: How do I start down the road to credit repair if my credit score is trashed? I have late payments, collections, maybe even a repossessed car…

Philip Tirone: I always tell people that there are two things they must do to start the process. If they are unwilling to do these two things, credit repair will be unsuccessful.

1. If you truly want to learn improve your credit score, get hold of your credit score and credit report. This will give you an opportunity to measure your progress. As you start taking steps toward credit repair, you will be excited as you see your score jump a few points here, a few points there, and lots of points over yonder.

Before you start reviewing your credit record, you should review a few facts about pulling your credit report. Be sure to understand the difference between your credit score and your credit report by reading our article about the credit score scale. This article will also explain how to determine whether you have good credit, mediocre credit, or poor credit.

2. The next thing you must do to set the stage for success credit repair is to come to terms with a very simple fact. Robbing Peter to pay Paul is not going to solve your financial problems. You cannot sustain a plan whereby you pay one credit card bill with another credit card. Learning how to improve your credit score depends on lowering your expenses or increasing your income.

Once you create a budget for yourself, you will see where your money is going, and you will have the opportunity to make other choices and start planning for your future. Without establishing a baseline of your weekly or monthly expenses, it’s difficult to make a plan for credit repair because you will not know how much you can truly afford to pay on each of your bills. By tracking your spending, you can find opportunities to pay down your debt or increase your investments.

Credit repair includes:

• Logging your expenditures and identifying when and why you spend money frivolously.
• Using technology to help you make payments. You can setup automatic payments online and use your electronic calendar to schedule reminders.
• For the absent-minded, credit repair might be as simple as organizing your life.
• Setting expectations. Create some goals in terms of how much money you want to save or how low you want your balances to be. Then create a plan to meet these goals. If they seem impossible, ask your boss for additional hours at work, or take on a second job.

Replacing your bad credit with good credit is critical to your future financial investment opportunities. Understanding the importance of budgeting in credit repair, as well as how to improve your credit score, is your initial path toward a financial boost.