10 ways to jump-start your credit repair

Carrying credit card debt is extremely stressful. It can hurt your credit score, affect your ability to procure loans, and, in extreme cases, even drive you into bankruptcy. Unfortunately, having a lot of credit card debt is a reality for many Americans.

It's not surprising that many people's credit scores could use improvement. The following 10 methods can help you jump-start your credit repair process and reclaim your financial freedom.

1. Know what makes up a credit score

Your credit score is based on your credit history, with a particular emphasis on your payment behavior. In order to improve your credit score, it's critical to understand how it's calculated:

• Payment history, 35%
• Amounts owed, 30%
• Length of credit history, 15%
• Credit mix in use, 10%
• New credit, 10%

2. Examine your credit report and dispute any errors

Credit reports contain the data on which your credit score is based. These reports, however, are subject to human error and sometimes contain mistakes. You should look at a detailed report of your credit history and make sure that any negative information is actually correct.

By federal law, you are entitled to receive one free credit report every 12 months from each of the three credit reporting bureaus: Equifax, Experian, and TransUnion. If you find any errors, get in contact with the bureaus to request corrections. If there is negative information that is later removed, your credit score should rise.

3. Set up payment reminders

Since payment history makes up the largest percentage of your credit score, it's important to maintain good payment habits. Chances are that every credit card bill you have is due on a different day of the month.

This can become confusing and cause you to miss payments, which in turn damages your credit score. Utilize the reminders available from your banks and card issuers to help ensure you pay on time, every time.

4. Create automatic payments

You also may want to consider setting up automatic payments that will take your payment out of your bank account every month. Then be sure the money is in your account at that time to pay at least the minimum amount due.

While it's better to pay more than the minimum due, an automated minimum payment delivered on time will keep your account in good standing.

5. Do not let cards go into collections

You may have heard that you can let debts go into collections and then negotiate with agencies. However, this practice will leave a derogatory mark on your credit score, and can take seven or more years to be erased from your report.

Coming back from that mark is tough and will affect your ability to get loans during that time.

6. Engage a credit counselor

The amount of debt you have relative to the amount of credit you have available is part of the "amounts owed" calculation. If you are not able to manage your credit card debt on your own, it may be time to get help. Rather than risking additional damage to your credit score, you may want to speak with a reputable credit counselor.

A credit counselor can educate you on best practices for credit cards and show you how to avoid getting into more debt. He or she can also assist you in exploring debt consolidation options so you can pay your cards off in one monthly payment with a lower interest rate.

7. Do not close existing accounts

When determining your credit score, the credit bureaus look at how long you've had all of your credit cards. If you close accounts, especially ones that you have been responsible with, this is going to have a negative impact on your credit score.

8. Do not irresponsibly open new accounts

Taking on new credit cards in order to move your debts around may not reflect well on your credit score. Applying for new credit means a hard inquiry is made, your score temporarily may fall, and your plan could end up backfiring. Lenders could think you are desperate or not as creditworthy as you actually are.

9. Utilize different types of credit

If you need to do a major home repair, it may be better to take out a loan than to apply for another credit card. It is considered healthier for your credit score for you to have a mix of loans and credit cards rather than to just carry credit card debt.

10. Try a balance transfer card

Paying down debt is great for you and your credit score. If you can trust yourself to pay a new bill, look into getting a balance transfer card. This strategy works best for responsible individuals whose current interest rates are too high. You can sign up for the card, pay a small fee to transfer your debt, and have a 0% APR for a set period of time—in some cases, up to 18 months. The key to this strategy, however, is to pay off the debt during the 0% APR period.

Depending on your situation, repairing your credit may take months or years, but it can be done. Create a plan and stick with it, and you'll soon have better credit—and less anxiety.