How do you repair bad credit?

Control over personal finance is a big step towards a happy life. There is little need to be a millionaire to live comfortably and contentedly, but with good handling of financial responsibilities comes a greater flexibility in purchasing wants. There is one major factor in making large purchases, the credit score.

Most lenders use the FICO score which is calculated by Fair Isaac Co. using your credit history. The best way to raise your credit score is to understand how it is calculated. Fair Isaac Co. doesn't disclose exactly how it calculates each score, but it has announced what goes into the calculation and how it is weighted. The good people at CreditCards.com have published an excellent article on the credit score calculation. There are five major things factored into your credit score.

1) Payment History

2) Debt Amounts

3) Length of Credit History

4) Credit Mix

5) New Credit

The CreditCards.com article details all of the points. Once bad marks make it onto your credit history, your score will be damaged for sometime. Depending on what the negative mark is, it will last on your credit history form 1 year to up to 10 years. The best way to digging out from under a bad credit score is by managing all the 5 points responsibly moving forward. It will take time to build good credit, but the fastest way is to start responsibly managing finances moving forward.

Paying all the minimums on time each month, reducing credit balances, and achieving a diverse credit mix isn't always possible after falling behind on debt payments. If the debt levels are not unmanageable, setting budgets and following them is the best possible way to get a handle on personal finance. Working on reducing outstanding debt, on credit cards or home equity lines of credit, is a great goal but almost impossible without a budget.

The best advice I can give is, look at your financial statements! Many people avoid the credit card bills, simply throw them out and pay the 20 bucks they want. This is the easiest way to lose control. You need to confront the situation before it becomes so overbearing that bankruptcy is the only viable option. Without looking at your statements you can never set a budget and attain your goals.

So read over the 5 things that make up a credit score, look over your expenses, and set a budget to responsibly manage your finances.

FICO score makeup by CreditCards.com