Bad credit is something no one wants to live with. Whether it’s the result of poor financial decisions, loss of a job or some other extenuating circumstance, bad credit can cost you money and opportunity.

No matter how many blogs or commercials offer quick fixes, there really is no such thing. It takes time to repair bad credit. But, if you take the appropriate steps, you can get back on track to achieve your financial goals, such as:

• Buying a home
• Purchasing a new vehicle
• Getting the rental you desire
• Getting married and starting a family

Get the facts about your credit.

The best place to start your quest to repair your credit is by obtaining a copy of your credit report. One copy per year is available free of charge from each of the big three credit reporting agencies: Experian, Equifax and TransUnion. You can get all three from a single source: AnnualCreditReport.com.

Although your credit report may not include your actual credit score, it can give you an idea of your overall credit picture, your debts and other factors that may be holding your credit score down. Once you’ve received your credit reports, ensure they’re accurate. Look at:

• Each of the accounts listed to ensure they’re yours
• Addresses to ensure they’re accurate
• Closed accounts
• Reported late payments or missing payments
• Notices about judgments
• Bankruptcies
• Credit inquiries

If you find any inaccuracies, notify the credit reporting agency showing the errant information. The agency will then conduct an investigation, which may take up to 45 days. Pending the outcome, the credit bureau will make a decision on whether or not to remove the information.

Cleaning up your credit report can provide a nearly instant lift to your credit score. It may take a little time and action on your part, but it’s worth every minute if it increases your credit rating. Every point in the right direction is a good step as you work to fix your credit.

Pay down your debts.

Your income is not included in your credit report, so a high debt-to-income (DTI) ratio won’t impact your credit rating. However, it can affect your options for loans and financing, including your ability to get approved for credit cards, auto loans and even certain rental properties.

Paying down your debts may require extra income. You could try to work extra hours or take on a side job temporarily. Ideally, your debt payments should account for less than 30% of your monthly income.

Remember, it’s important to make at least the minimum payment on your credit cards and loans every month since missed payments can have a serious negative impact on your credit score. If you’re able to free some income, consider one of these strategies:

• Pay down the credit cards with the highest interest rates first. This will lower your overall costs.
• Pay down the smallest balances first. This can help keep you motivated.

In either case, once the first balance is paid off, add the monthly payment you were making to the minimum payment on the next credit card or loan you want to pay off. In addition, put any extra funds you have toward the credit card or loan you want to pay off. Even an extra $20 toward your debts each month can help improve your DTI ratio over time.

Make payments on time.

Many people are shocked by the impact late payments have on their credit scores. It may not seem like a big deal to let a payment slide every now and then, but once it’s more than 30 days past due, it can be reported to the credit bureaus. Depending on your credit history and how late the payment is, it can knock your credit score down by as much as 100 points or more.

It’s not just credit card and loan payments that can have a negative effect on your credit score. Getting behind on other types of payments can reflect negatively as well if the organizations report late payments to the credit bureaus. This includes your rent, utility bills and mobile phone bills.

Paying bills and debt payments on time is one of the best things you can do to repair your credit — even if you can only afford the minimum payment on a large balance. Setting up reminders or scheduling automatic bill payments can help if you’re busy or a little forgetful.

Remember, creating good habits now can help you stay on track with your monthly bills so you can keep your credit score in good shape in the future.

Mind your credit utilization rate.

What is your credit utilization rate? It’s the ratio of revolving credit you’re currently using divided by the total amount of revolving credit available to you. Revolving credit accounts are, essentially, credit cards or lines of credit. And a high credit utilization rate can negatively impact your credit score.

The lower your credit utilization rate, the better. Ideally, your credit utilization rate should be below 30%. The assumption is that if you’re not using more than 30% of the credit available to you, you’re doing a good job managing your credit responsibly. Using less of your available credit can also help you qualify for lower interest rates.

How can you determine your credit utilization?

• Add together the amount you owe on all your credit cards.
• Separately, add the total maximum limits for all your credit cards.
• Divide the first number by the second number.

Say, for example, the total amount you owe on five credit cards is $2,500. Each of the credit cards has a limit of $1,000, so your maximum available credit is $5,000. Dividing $2,500 by $5,000 equals 0.5, which means you’re using 50% of your available credit.

In this example, you’d need to reduce your total credit debt by $1,000 without charging new credit to your cards in order to lower your credit utilization ratio to 30%. You’d have to reduce your credit debt even more if you wanted to get your credit utilization rate below 30%.

Paying your credit card balances in full each month helps keep your credit utilization rate within the desired window for lenders. If that’s not possible, try to pay more than your monthly minimum payments until you can lower your credit utilization.

Keep older accounts open.

Credit age is also important for your overall credit score; a higher average age can actually have a positive effect. When you finally pay off a credit card, your first instinct may be to close the account. But that’s a bad idea if you’re working to fix bad credit, especially if it’s a card you’ve had for a long time.

Even if you’ve struggled in the past with a particular credit card, the fact that you continue to have the account is good news for your credit score. It also shows lenders you were able to maintain a relationship with your creditor and that you did, in fact, honor your debt and pay it off.

There are exceptions to this rule. In the event your credit card has a costly annual fee or you’re afraid you’ll be unable to resist the urge to spend new money on the old account, it's best to consider closing the account. However, if you can avoid the temptation to spend and the card has no annual fee or a manageable annual fee, it will do more good than harm for you to keep the account open and in good standing.

One other benefit of keeping an account open is that the credit card account still adds to your available credit — even if you’re not actively using the card. That means it helps your credit utilization rate in addition to helping you establish a longer credit history.

Don't apply for new credit.

This step may be difficult, but it’s necessary if your primary goal is to fix bad credit and raise your credit score. Resist the temptation to apply for new credit.

Applying for new credit means a lender or credit card company does a hard check on your credit, which will show up on your credit report. Each credit inquiry can lower your credit score.

There are exceptions to this rule. For instance, if you have multiple inquiries from car dealerships within a short span of time (about two weeks), it will appear as though you’re shopping for the best interest rate and may have less of an impact. This exception is not universal, though, so you should limit credit inquiries whenever they’re not absolutely necessary.

Consider credit-building tools.

Once you’ve taken care of all the steps above to remove negative impacts on your credit score, it’s time to add some positivity into the mix. You can accomplish this by using credit-building tools to help you establish good credit in a manner most lenders will appreciate. There are two options available that are worth considering.

1. Credit-builder loans

These types of loans are widely available through credit unions. Although, some banks offer them as well. Here’s how credit-builder loans generally work:

• You apply for the loan and are approved for a specific loan amount.
• You make monthly payments to the lender for a defined term.
• The lender reports your timely payments to the credit bureaus each month.
• At the end of the term, you complete your payments and receive the money back minus any fees you agreed upon with the lender.

This allows lenders to give you the opportunity to build or repair your credit — and save money — without taking on any real risk. At the end of your efforts, you have an improved credit score and the funds you paid the bank while building your credit.

2. Secured credit cards

With these types of credit cards, you make a deposit into a secured account. This account is then used to secure your obligation to the credit card company. Some companies require 100% of the funds as an initial deposit while others accept varying amounts. Generally, though, if you deposit $1,000 into a secured credit card account, you’ll have a $1,000 credit limit.

Depending on the credit card company you work with, your credit limit may increase after six months or a set number of on-time payments. Others may have different requirements, and some may completely return your deposit and transition you to an unsecured credit card in time.

The idea is that you have an opportunity to rebuild your credit slowly over time by choosing either of these options.

Should you hire a credit repair agency?

Another option available to rebuild your credit is to hire a credit repair agency. The truth is you can do anything and everything a credit repair agency can do.

More importantly, a credit repair agency can’t remove negative information from your credit report if it’s accurate. If none of your reports have incorrect information, there isn’t much a credit repair agency can do for you other than cost you money that could otherwise be put toward savings or paying off debt.

However, if your credit reports do contain inaccurate information or you’re interested in negotiating with credit card companies to reduce your burden, you can work with a credit repair agency to accomplish your goal. In these instances, it’s all about whether your time is worth the fees they charge to do the work on your behalf.

If you choose to work with a credit card repair agency, beware of scammers. According to the Federal Trade Commission, you may be dealing with a credit repair scam if the agency:

• Insists on upfront payment before providing services
• Tells you not to contact the credit bureaus directly
• Asks you to dispute accurate credit report information
• Advises you to lie on loan or credit applications
• Doesn’t explain your legal rights when explaining what it can do for you

Ultimately, you are your best advocate when it comes to fixing bad credit. Following the steps outlined here will help you do exactly that. Just remember, it’s a process that will take time and dedication. Don’t give up. The result will be well worth your effort.