Unexpected problems can happen to the best of us - bankruptcy, divorce, legal judgments, unemployment, illness, etc. Any of these are very personal and can affect your FICO credit score in a big way. If you have faced a financial meltdown, you need to take action quickly and work consistently if you want to fix your credit and rebuild your FICO score.

1. Getting Good Credit To Fix Your Bad Credit.

This may seem contradictory but if you have bad credit, you need to establish better credit by taking out credit quickly and repaying it quickly.

If your credit got trashed by a bankruptcy or other major financial disaster, you may need to rebuild your credit rating by taking out a loan. Here is how to pull this off.

Some banks will require that you have enough savings to cover the loan before they will lend you money. This is a loan that is secured by your savings account. You need to sell something or borrow money from a family member or friend and open a savings account with that seed money.

You will put up your savings account as collateral. Try for $1,000 to start this. Talk with your banker for terms that will allow you to easily pay back the loan. Pay back the loan quickly because your savings are "locked" until you do. Try make double payments, too. When the loan is paid off, do another loan the same way.

This method is inexpensive, too. You will be paying interest on the loan while you earn interest on your savings account to offset some of the loan costs. It's a win-win for you and the bank.

This method will not hugely boost your credit score but it will show up on your credit report and prospective lenders will see that another lending institution trusted you.

2. Try a secured credit card if you cannot qualify for other types of credit cards.

A secured credit card works the same as the savings account method. You will be required to put up an amount equal to the credit card available credit limit to secure the card issuer. Instead of cash, you may also put up assets as collateral such as equity in a house or a vehicle that you own outright.

Secured credit, whether in the form of a credit card or a installment loan, is something most people can qualify for and you will be in a much better position to qualify for other loans in the future. You may have to pay slightly higher interest if your credit score is below average but, in the long term, repaying such secured credit loans can improve your credit score.

3. It takes time to rebuild your credit in the traditional way.

In the most serious cases, simply paying off debts will not dramatically improve your credit score immediately.

If you have experienced a bankruptcy, have been reported to a collection agency, or have had charge-offs, they will remain on your credit report even after you have repaid your debts. In fact, major problems such as a bankruptcy will remain on your credit report for up to ten years, affecting your credit score.

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