Everyone needs either large or small repairs done to their credit. In a perfect world, we would all have the money in our budgets to hire a professional credit repair company. But unfortunately a lot of people must depend on themselves and find the best ways to fix their credit on their own. The following tips will help you start making improvements to your credit.
Get A Copy Of Your Credit Reports
Make sure you get all 3. Experian, Equifax and Transunion. Finding out the information from your credit reports and knowing your credit score are the first steps in the process of credit repair. There are several websites that provide this service, including some that offer a free first report. Once you have this important information, you can take a look at your credit, and make plans to fix it.
Check Your Reports For Errors
Once you have obtained your credit report, review it thoroughly, and make a note of any negative things you come across. Everybody makes mistakes and credit scores are not 100% guaranteed right. That’s why you should check for mistakes and unfair charges. The first step in fixing these bogus reports is knowing what you are up against.
If you find that there are items being reported inaccurately, no matter how small it seems, you should request that it be fixed. Take note of any late payments, charged off accounts, judgments an collections. Make sure they amounts are being reported correctly, the dates, and the status. For example, if you paid a collection account off and its still showing as in collections.
If everything is being reported accurately, then you need to prepare to speak to your creditors.
Debt Negotiations: A Vital Part of Fixing Your Credit
Try to have an honest, realistic conversation with your creditors. More than likely, they will be able to guide you to making better financial choices and give you suggestions on repayment options. You can avoid paying penalties and additional interest when you have this information. You should concentrate on paying the most recently reported items first. If you can stop an account from going into collections or being charged off, you should do so. Focusing on old items that have already harmed your credit won’t help you as much as preventing more negative items. and postpone the others.
Try to build a payment plan to pay off your late debt. Collection agents will work with you to find a solution; they might even settle for an amount lower than what you owe. Avoiding these agencies though will not promote their cooperation. If you are open with your creditors, they will be more likely to set a reduced payment amount, and not add any more charges to your bill.
Once you have settled your current bills. Then you can move on to old negative accounts. Anything that has been charged off or is over 3 years old with no payments made. You can negotiate for pennies on the dollar. They will try to get you to pay more but its up to you to negotiate with them. You are actually in a position of power. At this point they don’t expect you to pay anything. And expected this would be an unpaid charged off account.
Get Your Settlement In Writing!
Make sure BEFORE you send any money that you get the agreed upon amount in writing from the credit or collections agent. Get it in writing. fax is preferable. That way you have it on their letterhead, the fax number it came from is at the top and you got a signature of someone claiming to be empowered to make a deal with you. If you don’t have the deal in writing you DON’T have a deal! Some collection agencies will try to trick you. They will offer a low amount and when you pay them, they act like you are making a payment TOWARDS the total amount owed. Now not only have they got your money, but by paying on the old debt you have given it a new reporting date. So if you don’t pay the rest it will continue to be reported on your credit report for 7 years from the date you last paid.
Lower Your Debt To Income Ratio
Every month you should be paying down your debt. Once you have each card under 30% utilization, you will see a HUGE boost to your credit score. Start by paying on the credit cards and loans with the highest balances. Allocate the most money to those each month. Some people go out and get a 2nd job to help them pay off their debt. We have even had clients that took the leap into starting their own part time business. Whichever way you choose to obtain extra income, that income should go immediately to paying off your debts.
Start Building New Lines Of Credit
A big part of credit repair that gets overlooked is rebuilding your credit. You need to show that you are now able to make on time, monthly payments. Some people get a secured credit card to start the process since they are basically guaranteed approval.
If you don’t have the money to put down as security you can look into applying for unsecured credit cards for poor credit. These card tend to have a fee attached to them, but the lenders are LOOKING to lend to people with a poor credit score. So even if you have a low credit score, you still have a chance of being approved with these lenders.
A new service that just hit the market is Rental Karma. This service will allow you to add your rental payments to your credit report. For around $5 a month they will report your rent on your Trans Union (they are currently negotiating with Experian and Equifax). That will add a nice positive line of credit to your credit report.
Best Way To Fix Credit
The best way to fix credit is to follow the above steps and learn from this experience. Having bad credit should only be a short part of your financial life. Studies have linked bad credit with stress. You don’t deserve to live a stress filled life. Even if you implement this plan a little at a time, know that every step you take will help you improve your credit.