Ways to Repair Your Bad Credit
If you are struggling from the effects of a low credit score, you have probably thought good and hard about the potential benefits of hiring someone to "repair" your credit for you. Before you spend any of your money on one of these "professional" credit repair services, take stock of the situation. Is your credit mess something you can repair yourself? It probably is, and by doing so, you will learn much about your finances and save money at the same time.
Step 1 - Get Your Credit Report
Nothing can be done to improve your credit until you know what is wrong with it. You can get a free copy of your report, not your score, from each of the three credit bureaus every year by visiting annualcreditreport.com. If you need to know the score, visit the credit bureaus' sites directly to order a three-in-one report. You will have to pay a little for this, but it contains very helpful information.
Step 2 - Study the Report
Once you have your report, study it closely. Look for errors, because repairing errors is the first step towards increasing your score. Common errors to watch for include:
* Accounts with the wrong credit limit listed
* Accounts that are not yours
* Payments incorrectly reported as late
* Credit inquiries that you did not authorize
If you notice any errors, contact the company responsible for the account. Ask them to prove that the account is yours, late payment is accurate, etc. If they cannot prove this, they are required to remove that information from your credit history.
Step 3 - Pay Down Debts
Paying down debts seems like the obvious answer when you want to improve your credit rating, but you want to do it in the right manner. The amount of debt you have in comparison to your credit limits plays a part in determining your credit score. Pay down debts so that you owe about a third of what you are allowed to borrow on each account.
For instance, if you have one card that is at its max of $4,000, you need to pay that down until it is around $1500 first. You may have another card that also carries a $4,000 balance, but if it has a credit limit of $15,000, it is not having as much of a negative impact on your score as the first card. Focus on that debt-to-credit-limit ratio as you pay down your debts.
Step 4 - Add Some Positives
If you start paying every single bill on time every single month, even if all you can manage is the minimum payment, you will see an improvement in your credit history. This is not an instant fix, but start now to improve your payment history on all accounts. Not only will this help you learn to manage your money better, but it will also go a long ways towards improving your credit rating in the long run.
Step 5 - Focus on Past Due Accounts
If you see any past due accounts on your credit rating, start paying them now. If you have a charge-off, pay it. If the account has been sent to collections, work with the debt collectors to bring the account current as quickly as you possibly can. The minute your past due accounts are reported as "current" or "paid," your credit history will improve drastically.
Doing your own credit repair is entirely possible. You simply need to know what steps to take. Remember, credit repair takes time. You will not see improvements overnight, unless there are glaring errors and you are able to get them removed quickly. However, with patients and persistence, you can raise that score and put yourself in a better financial situation.
Step 1 - Get Your Credit Report
Nothing can be done to improve your credit until you know what is wrong with it. You can get a free copy of your report, not your score, from each of the three credit bureaus every year by visiting annualcreditreport.com. If you need to know the score, visit the credit bureaus' sites directly to order a three-in-one report. You will have to pay a little for this, but it contains very helpful information.
Step 2 - Study the Report
Once you have your report, study it closely. Look for errors, because repairing errors is the first step towards increasing your score. Common errors to watch for include:
* Accounts with the wrong credit limit listed
* Accounts that are not yours
* Payments incorrectly reported as late
* Credit inquiries that you did not authorize
If you notice any errors, contact the company responsible for the account. Ask them to prove that the account is yours, late payment is accurate, etc. If they cannot prove this, they are required to remove that information from your credit history.
Step 3 - Pay Down Debts
Paying down debts seems like the obvious answer when you want to improve your credit rating, but you want to do it in the right manner. The amount of debt you have in comparison to your credit limits plays a part in determining your credit score. Pay down debts so that you owe about a third of what you are allowed to borrow on each account.
For instance, if you have one card that is at its max of $4,000, you need to pay that down until it is around $1500 first. You may have another card that also carries a $4,000 balance, but if it has a credit limit of $15,000, it is not having as much of a negative impact on your score as the first card. Focus on that debt-to-credit-limit ratio as you pay down your debts.
Step 4 - Add Some Positives
If you start paying every single bill on time every single month, even if all you can manage is the minimum payment, you will see an improvement in your credit history. This is not an instant fix, but start now to improve your payment history on all accounts. Not only will this help you learn to manage your money better, but it will also go a long ways towards improving your credit rating in the long run.
Step 5 - Focus on Past Due Accounts
If you see any past due accounts on your credit rating, start paying them now. If you have a charge-off, pay it. If the account has been sent to collections, work with the debt collectors to bring the account current as quickly as you possibly can. The minute your past due accounts are reported as "current" or "paid," your credit history will improve drastically.
Doing your own credit repair is entirely possible. You simply need to know what steps to take. Remember, credit repair takes time. You will not see improvements overnight, unless there are glaring errors and you are able to get them removed quickly. However, with patients and persistence, you can raise that score and put yourself in a better financial situation.