Now, your goal should be to pay everything off immediately and not use credit if at all possible,  but sometimes credit is necessary.

Furthermore, bad credit can prevent you from getting hired at certain jobs, from renting a car, even from getting a cell phone.

So it is important to rebuild your credit.

To do this:

Pay your bills on time. Make this your top priority. Pay them a week early so that you are SURE that they arrive on time. If you literally do not have enough money to pay them off on time, you need to either take on a part time job for extra money,  sell possessions, liquidate assets, or negotiate with your credit card company.

Get a secured credit card and ALWAYS pay it off on time. Charge very small amounts and then pay them off. You can carry a very small balance if you want – $10 or $20 – but NEVER make your monthly payment late. After a year of always paying off on time, apply to change it to an unsecured credit card.

Make it a priority not to charge more than 30 percent of your available credit. If you have charged more than 30 percent, make it a priority to pay that down first. Your credit rating goes down when you have less available credit.

It is true that too many inquiries by CREDITORS will lower your score, but it does not lower your score when you make inquiries yourself.

The reason that it lowers your score when loan companies make inquiries is that it sends a signal to the credit scoring company that you are about to take on more debt.

That’s why it’s not generally a good idea to apply for a department store credit card just to save 10 percent on your purchase – because it will lower your credit score, which may end up costing you more in the long run.

When you check up on your credit score, it is considered a “soft” inquiry which does not affect your credit.

When a prospective employer checks on your credit, or when credit companies check on your credit without checking with you first (say, if they want to offer you a loan, or a free cell phone), that is also a soft inquiry.

When you apply for a loan, for a cell phone plan, for a new car, for a mortgage loan, THAT is a “hard inquiry”.

Sometimes it is necessary to apply to for credit, but never do so casually and try to limit the number of places that you apply for credit with.

According to the Federal Reserve, up to 79 percent of credit reports contain errors, and 25 percent of them contain errors so serious that they result in credit being denied.

This is especially crucial these days when loan standards have tightened and if your credit score is less than perfect, you may not qualify for a mortgage, car loan, or student loan.

A low credit score also means much higher percentage rates on your credit cards, your mortgage loans, your credit cards, and any other loan that you are approved. You could easily end up paying thousands of dollars a year more than necessary simply because of errors on someone else’s credit score.

It is vital that you regularly review copies of your credit report to make sure that it is accurate. If there are errors, you need to send a letter to the credit reporting agency disputing it, and to the company that provided the inaccurate report.

You must keep pursuing the credit agency and the company which gave the false information, sending them letters and keeping copies of all correspondence to and from them, until the errors are removed from your report.

If you don’t, you are giving away money that you could be saving or using to pay off bills.