Bad credit doesn't necessarily mean you can't get credit; you just can't get credit at a reasonable cost. The interest rates you are charged are sky high because you had some financial difficulties in the past. In this article we will give you three methods for repairing your credit. The method that is best for you will depend on the severity of your financial problems.

Problem: Incorrect information on your credit report.

Method #1: Contact the credit bureaus.

Let's say you've requested a copy of your credit report from the three credit bureaus, and you find that there is a negative entry or two from your past lenders. It could be the negative information is just, plain wrong. The lender reported you still had an outstanding balance, when in fact, you have proof you have paid off the loan. This is an easy problem to fix. Well-written letters to the credit bureaus, with proof of your claim, should correct the problem.

Problem: Multiple overdraft fees.

Method #2: Pick your bank carefully.

As if it's not painful enough to be hit by multiple overdraft fees for your checking account, if your bank reports them to the credit bureau your credit score suffers too. Unfortunately, it's all too easy to withdraw more money from an ATM than you have in your checking account. Most banks encourage it by including "bounce protection" in their terms and conditions. After all, the bank gets another $20 to $35 overdraft fee each time.

You could stop and check your balance at the ATM before making the withdrawal, but when you're in a hurry that often doesn't happen. A fail-safe method is to just pick a bank that doesn't automatically include bounce protection with all their accounts. That way, if you're low on funds, the ATM won't dispense, and you'll avoid yet another overdraft fee.

Problem: Low ceiling on your line of credit

Method #3: Sub-prime merchandise cards.

Maybe you're having trouble getting credit because of some past financial difficulties. You want to build up your line of credit, but new lenders are keeping their distance from you.

An easy way to increase your line of credit without getting into a financial bind is to get a sub-prime merchandise card. This is nothing more than a card attached to a line of credit that allows you to buy merchandise from a specific vendor (usually the company that sold you the card). You're required to put down a deposit on whatever you purchase, and the remaining balance is financed on the card.

The advantage of the sub-prime merchandise card is that this new credit line will be reported to the major credit bureaus, and your credit report will reflect this good news. For example, if you get a $5,000 card and you finance a $500 purchase, your high credit limit will be increased by $5,000 almost overnight. And the small outstanding balance on the sub-prime merchandise card will also positively impact your credit report by showing potential lenders that you are credit worthy once again.

Pick the method that is best suited for your bad credit problem, and enjoy the financial advantages that an improved credit report will bring.