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Step by Step Instructions to Repairing Your Own Credit

There is an easy to follow set of ten steps to follow to repairing your own credit. This is not rocket science, but it does require some patience, persistence, and a little bit of elbow grease. Roll up your sleeves to do the following steps on your own.

1. Obtain the Most Recent Copies of Your Personal Credit Reports

You can not effectively begin to repair your credit until you know what you need to  repair in the first place. It is in your credit report where you will find the various mistakes that you have made which have caused you to have bad credit. When you read through it, you should be able to quickly find the derogatory items that are hurting your score. These are listed in their own derogatory items section. 

You can easily get your three credit reports for free by going online to the AnnualCreditReport.com website to request your annual free copies. You could order this via the phone or mail if you have plenty of time to wait.

2. Review Your Own Credit Reports for Potential Mistakes

This is actually your best hope to improve your credit right away. You are looking thoroughly for any mistakes that the bureaus might be reporting. For you who own a long credit history, these reports could easily be a few pages in length. 

Do not become overwhelmed or discouraged. Take your time to thoroughly go through them and catch any and all mistakes. 

Every credit report holds your personal identification information, detailed account history, derogatory information such as collections accounts and past due accounts, public records of bankruptcy, and hard or soft inquiries which others have made on your credit report. 

3. Determine What Needs to Be Repaired

There are three kinds of information that may need to be repaired on your credit reports. These start with inaccurate information such as accounts that do not belong to you, falsely reported late payments, and related information. You should carefully read the derogatory remarks section for any late accounts, charge offs, or collection accounts that do not belong there. Also pay close attention for inaccurately listed maxed out accounts which have gone over your credit line. 

You can use different color highlighters for the various kinds of information so that you can color code your personal credit repair plan. Each of the different types of information will require different tactics. For example, you would react differently to inaccurate information than to accounts that are past due. This is why using different color highlighters can save you time and help you to quickly find information when you contact (or write letters to) creditors, lenders, or the big three credit bureaus. 

4. Dispute Your Credit Issues

The next step is to dispute the issues that you have hopefully found needing correction on your three personal credit reports. There is a long running debate on which way you should file these disputes. Online disputes go quicker and are simpler to do, but they do not leave you with a paper trail. You might take dispute screenshots and save these. 

If you call the bureaus, you have absolutely no record of your disputes. 

As tedious as it may seem, filing disputes via the regular mail comes with a few key advantages. It allows you to include evidence to support your dispute, like cancelled checks that demonstrate making your monthly payments in a timely fashion. It is easy to keep a copy of any dispute letters that you send out this way in a file as well. 

A last significant benefit of using traditional mail is that you can send it out through certified mail using return receipt requested. This additional expense will provide you with the hard proof that you need of the day and time that you mailed your dispute. 

Credit bureaus are limited to no more than 30 to 45 days to research and rule on your disputes. 

It is easy to come up with an effective template for credit report disputes when you will be mailing out multiple disputes. Save this on your computer, and then you can quickly and easily update it for any different consumer credit bureau or individual dispute. Be sure when dispatching your disputes to insert a credit report copy that includes a highlighting of the item being disputed. Also send your documented evidence that proves your case (a copy and not the original). 

Be careful not to file more than one or two disputes at a time with the credit bureaus individually, as they may simply decide that you are making frivolous disputes and dismiss them all out of hand. 

You should never include more than a single dispute in each letter that you send out to avoid arousing suspicions from the big three credit bureaus.

While you are at it, you might as well send copies of your disputes directly on to the business or bank that originally submitted the information incorrectly to the bureau. Their legal obligations are the same to investigate your filed dispute and update any incomplete, incorrect, or non-verifiable information to your credit report. 

5. Follow Up On Your Credit Dispute

Hopefully your dispute will be a success, and you will have the results you desire in an updated and improved credit report. They should also send the alert out to the other big two credit bureaus of the change, but you should follow this up personally. The bureau will dispatch an updated copy of your full credit report to you with the resolution. 

If they do not take away the item off of your credit report, they will at the least update it to reveal that you have disputed the negative information. You are then provided the chance and space to include your personal statement on your credit report. While this personal statement will not influence your actual credit score, it does provide more insight into why you disputed the item. Businesses reviewing your credit report manually will see it and consider it. 

6. Addressing Past Due Accounts

Past due accounts are devastating on your credit report. They fall into the most crucial category of timely payment history that comprises fully 35 percent of your entire credit score. Because they are so important, it is crucial to avoid multiple past due account listings on your credit reports. 

These can cause a negative impact of from 90 to 110 points on your final credit score. 

Getting these removed if at all possible is a key task in any process of credit repair. You want to see any and all past due accounts reported to say “paid” if not “current.” You can contact the creditors directly about removing past due payment notifications from your credit reports once you have brought them up to date. 

As far as any accounts go on which you are behind, you should make them current before they become charged off. Charge offs are among the most serious derogatory account comments. They do not happen until your account is 180 days delinquent. Any of your accounts that are in this delinquency period (but not yet at 180 days late) you can save by paying the full past due amount. 

You should know that the more you are behind, the higher your payment to catch up on the account will be. You should call your creditor at once to determine what it will take to bring the account current before they charge it off.

Many creditors will consider removing late penalties when you call them, or at least be willing to spread out the overdue balance over several payments to help you catch up. 

Make sure that they understand that you do not want to have the account charged off, but that you require a little help to catch it up. In exchange for catching up on your account, they might consider re-aging your account so that all payments are marked current instead of delinquent. You will have to speak with the creditor in question in order to negotiate such a beneficial outcome. 

Accounts that are already charged off you should pay off anyway. The balance is still your responsibility even after the creditor has written them down. Charge offs impact your credit score less as they age, yet having an outstanding balance such as this will make it night on impossible to receive approval on new loans or to obtain new credit. This is why a part of your credit repair task involves paying down charged off accounts. 

When you pay this charge off completely down, the creditor will then update your credit report. It will show the account balance as fully paid with a balance of $0. 

Unfortunately, the charged off status does not go away until after seven years from the original charge off date. 

At least you will have minimized the damage though. You might also settle the charge off amount for less than what you owe. Your creditor will have to agree to work with the proposed settlement and to cancel out the remainder of the original debt. 

This settled status will show on your credit report and not drop off for the full seven years. It is possible to negotiate with a creditor to take away the charge off status from your credit report in exchange for paying the full amount. 

Be warned that this is not easy to accomplish, but it is worth trying. The most critical step at this stage is to pay down the charge off. 

If you are able to get a favorable resolution to the account status, consider this a great and added bonus. 

You also need to handle your collection accounts. They would have gone to collections after having been charged off or alternatively after becoming past due a number of months. Accounts that would not typically be shown on your credit report can go to collections too, and at this stage unfortunately they do show up on your credit report. You will be using a nearly identical approach for paying off collections accounts as you did for charged off ones. 

Offer to pay in full in exchange for a delete of the negative collection account notation. You might also settle the account for a smaller amount that what you originally owed. Otherwise, the collection notation will remain on your credit report for a full seven years from the date of original delinquency. 

7. Reduce Your Credit Card Utilization Ratios and Outstanding Loan Balances

Remember that your credit account utilization is the second largest component of your credit score, worth 30 percent of the whole thing. The larger your balances on each card, the more damage it will do to your credit score. This is an area where you can get almost immediate results with improving your score. 

Start with any maxed out and over limit credit card accounts. These cost you important credit score points (on top of the over limit fees you are likely paying as well). 

By reducing any over limit or maxed credit cards below their limits, you will be moving that credit utilization ratio down significantly. From this time, make it a point to tackle first one credit card and then another, dropping their balances one by one to less than 30 percent of available credit utilization. Your credit score will be higher when each balance (plus your average balance) is less than the 30 percent ratio. 

Under 10 percent is even better and gives you still more score points. 

Loan balances are important to consider too. Your credit score algorithm considers your present loan balance versus the original loan amount. The nearer your balances are to the original borrowed amount, the more significantly this impacts your credit score. Credit card balances have the largest effect on your credit scores, so focus all efforts on paying these down to under 30 percent (or even under 10 percent) before you address your loan balances. 

8. Prioritize Your Payments Effectively

The truth is that you will only have a limited number of dollars to apply to your credit repair activities every month. This means that you need to prioritize effectively in where you send your payments. 

The best strategy is to concentrate on accounts that are nearing past due status. You should make all of these (or as many as possible) current. 

Next you will focus on reducing your credit card balances and credit utilization ratios. Your last priority is to make payments on accounts that are already marked as charged off or which have been dispatched to collection agencies. In general, the damage here is already done on these with derogatory remarks likely to remain on your credit report for years (seven), even after you pay them off or settle them. 

9. Applying for New Credit

Once you have done everything that you can to address any derogatory items in your credit report, your next step is to focus on having some positive credit information included on your report. Even as late payments do great damage to your score, timely payments on accounts improve it. Once you get a few credit card and loan payments reported as on time, this only helps. 

Keep these balances at less than 30 percent and be sure to make all payments on time every month. 

You can improve your credit (or rebuild it) through opening up a new credit account. It may be hard to receive approval if you have past delinquencies, so do not make more than one or two applications until you see an improvement in your credit score. This is crucial for keeping the number of hard credit inquiries down. 

Every time that you do another application for credit, another hit appears on your credit report under the inquiries final section. Too many of them within a two year period (after which they drop off) will harm your credit score and worsen your chances of becoming approved for new credit. 

A good strategy following a rejection from a MasterCard or Visa is to approach a retail store for their store charge card. They are known to approve applicants with either poor or limited credit history. You might also try obtaining a secured credit card with a deposit which you make against the credit limit. 

Secured credit cards are extremely useful as you can use them everywhere that MasterCard or Visa is accepted (whereas store cards can only be used at the store or on its website). There are a number of subprime credit cards whose focus is on assisting their customers with rebuilding their credit. Check out their interest rates and fees before you apply, as these will be higher. It is smart to pay down these balances in full every month if they come with high APRs.  

10. Salvage As Much As You Can

One thing to keep in mind is that you should not ever sacrifice an account (or several accounts) that are current for accounts that are past due or charged off. The most important thing at this stage is to keep making on time payments for each of your current marked accounts. 

You want to hold on to all positive payment history that you can while you are repairing your damaged credit.