5 steps to do-it-yourself credit repair
Blotches on your credit report cost you.
But, don't despair. It's never too late to become credit worthy
-- just get started, and remember that it won't happen overnight.
Here are 5 steps for improving your credit rating:
1. Order your credit reports
Find out what the top three credit bureaus -- Equifax, TransUnion
and Experian -- are saying about you. It's likely that they're all
slightly different. Yes, different! Creditors don't have to report
to all three credit bureaus, so they typically report to the credit
bureau to which they also subscribe.
Useful phone numbers
Time and money is wasted, says Steve Rhode, president and co-founder
if you only order a report from one credit bureau. You can order
a credit report from each bureau for free once a year through annualcreditreport.com.
If you've been denied credit, insurance or employment because of
your credit report, you are entitled to a free copy of your report
from the reporting agency. The company you applied to must supply
the credit bureau's name, address and telephone number. You have
60 days after receiving the denial notice to request your copy.
2. Examine your reports carefully
Nearly every consumer has an error on at least one credit report
from one of the major credit bureaus, says Rhode. Credit bureaus
generate your report on information they receive from your creditors;
they don't verify.
Keeping your credit report a true reflection of you
is -- like it or not -- your job. Get ready to clean and polish.
Carefully look for everything from typing errors, outdated and incomplete
information to inaccurate account histories. You'll want to make
a thorough list of items you dispute and why. Be meticulous.
to read and understand your credit report.
If the negative information in your report is true, only time and
improved habits can change that. Late payments, such as credit
cards, and charged-off accounts remain on your report for seven
years; bankruptcies for 10. Most creditors, however, look for a
pattern of payment rather than focusing on one-time or rare occurrences;
so consistent on-time bill payments will improve those blemishes.
3. Double-D strategy -- dispute
Remember, a bad report costs you money. So, it pays to be thorough!
You can either complete the dispute form provided with your credit
report or write a letter. Clearly identify each mistake and state
why it's wrong. A recommendation is to send a photocopy of your
credit report with the mistakes circled to the reporting credit
bureau. Include copies of supporting documents.
Document, document, document. Keep copies and records
of all the forms, letters and documentation that you send the credit
bureaus, plus dates sent. The credit bureau must investigate any
relevant dispute within 30 days of receiving your letter. Any item
that is not verified as accurate by a creditor is removed.
Sometimes it's necessary to contact your creditors
to resolve mistakes. Bankrate's 7
steps to fixing your credit report will help you tackle the
If the credit bureau makes any changes to your credit
file, it will send you the results and a free, updated copy of your
credit report. Once a negative item is removed from your report,
the credit bureau cannot put it back on unless a creditor verifies
its accuracy and completeness -- and sends you written notice.
4. Solve and dissolve debt
Now's the time to devise
a spending plan that reduces your debt and sets you up to pay
on time, every time.
If you're having difficulty making payments, be proactive.
Call your creditors and negotiate to keep your accounts current
and from being reported as delinquent or "bad debt." You
can ask for reduced monthly payments, or even change due dates to
balance out your monthly bills.
The same strategy can be used for fixed-loan payments.
Remember, though, that this is a short-term strategy. You'll pay
more interest to extend the repayment schedule, but it allows you
to stay current and save your credit rating. Use the extra money
to pay off debts one at a time, gradually increasing payments to
Check out Bankrate's 10
steps to paying off credit cards for more ideas.
Deal with any collection accounts. Unpaid collections
are worse than paid collections. You can negotiate a pay-off settlement
that reduces your bill, plus demand that all derogatory remarks
are removed from your credit report or at least reported as paid
in full. Be sure to get verbal agreements in writing before sending
off your payment.
Slowly close out unneeded or unused credit accounts. Most experts
recommend carrying between two and four credit
cards. But, be cautious when canceling because closing accounts
can negatively impact your credit score, commonly called a FICO
score. FICO considers the ratio of total debts to total available
credit. A good rule of thumb is to keep your revolving debt to 50
percent of your available credit.
Remember that cutting up the card doesn't close out
the account. Here's a step-by-step
guide to smartly close out your account.
- Close out your newest accounts so that
you don't lose your longer credit history.
- Close out accounts slowly over several
- Verify that all accounts you've closed
are reported as "closed by consumer" for the best report.
- Even if creditors offer to raise credit
limits, allow yourself only moderate credit limits.
- Keep your balances low and avoid revolving
5. Add stability to your credit
You can also work to add positive information and show stability
in your credit file.
You may have been denied credit because of an insufficient
credit file, yet you have credit. Some creditors -- such as, travel,
entertainment, gasoline card companies, local banks and credit unions
-- may not report your credit history to the credit bureaus. You
can try asking the credit grantors to report your account information
and monthly payment history to a credit-reporting agency. Not all
will do that. So, in the future, before opening a new account, ask
if your on-time payments will be reported monthly to a credit-reporting
agency, recommends Myvesta.org.
If you have really bad credit -- perhaps even filed bankruptcy
-- don't let your credit status go dormant. "The faster you
begin to re-establish good credit, where you pay on time, every
time," says Craig Watts, consumer affairs manager of the Fair
Isaac Corp., "the faster you'll improve your credit score."
Build a solid credit history. Secured credit cards offer people with no credit and those repairing
their credit this opportunity. Shop around for the best deal available,
but limit your applications. Credit bureaus look at how many new
accounts you've opened, and the number of "inquiries"
for new accounts that are listed. A sudden flurry of "inquiries"
results in a lower score, because many times consumers anticipating
money problems increase their credit lines. Inquiries made by creditors
wanting to make "prescreened" credit offers are not counted.
Lastly, open a savings account at your bank. This
shows creditors that you are working to save and that you have reserves
to repay debts.