Credit Repair Tips Guide [For Beginners]

credit-repair-tips-guide

A low credit score can really suck. It makes it difficult for you to get loans to make major purchases to buy things like cars and houses. Insurance companies may also raise your rates based on a high credit score. Employers may even check your credit score and base their hiring decision on what they find.  

Maintaining a good credit score is important, but if you are careless about paying your bills or find yourself in financial circumstances that make it difficult to pay your bills, you may notice that number going down. At this point, your main priority will be repairing your score, especially if you are looking to make a major purpose.

This article will review your options so you can improve your credit score ASAP. 

Removing Late Payments

One way of improving your credit score is to remove late payments.

Late payments will stay on your credit score for up to seven years. As time passes, they won’t have as much of an effect, but you will still want to get rid of them ASAP.

Here are some ways you can make it happen. 

Dispute Errors: Even though there may be late payments on your credit report, they may not all be accurate. Review your report to see if there is anything there that don’t belong there. Then dispute them with the credit bureaus.

Credit bureaus are so busy that it’s likely that they will let the mark drop off if you’re persistent enough.

Write a Good Will Letter to the Lender: If a lender is turning you down for a loan based on late payments on your report, try writing a letter to see if he will change his mind. In the letter, explain to him that you were going through temporary financial hardships and that he should not expect this type of behavior from you in the future. 

When writing the letter, stay brief and to the point, be polite and most importantly, make sure it’s getting to the right person. If you have any evidence supporting a financial hardship, be sure to include it along with the letter. 

Agree to Automatic Payments: Another thing that might sway a lender’s decision is agreeing to automatic payments. If the lender knows that payments will be automatically deducted from your account, they may be more likely to give you a loan. 

Include a Credit Report Note: According to the Fair Credit Report Act, you are able to include a 100-word note explaining your financial situation directly on a report you provide to lenders. You will have to contact all three credit bureaus in order to do this and it is only advisable if you think the note will help improve your chances of getting a loan.  

The loan’s underwriter will review the note and the facts to decide whether or not a loan should be granted.

Related post:  Options For Removing Late Payments From Your Credit Report

Contact a Credit Repair Professional: A credit repair professional may be able to help you get rid of late payments and clear up other issues that are bringing your credit score down. However, it is difficult to find one you can trust. 

A credit repair professional should never charge you up front for their services. You can also check out online reviews to determine if you are working with a reputable company. 

Check for Errors and Dispute Them

You can improve your credit score by checking for errors and disputing them. Here are some common errors that may occur.

  • Late payments left on your report for over seven years. 
  • Credit accounts that don’t belong to you.
  • Accounts you’re not a co-signer on. 
  • An account you closed that shows as being closed by the provider.
  • A debt that was paid off but is still showing up as unpaid.
  • A tax lien that is over seven years old.
  • A debt that was dismissed in a bankruptcy that is still showing up.
  • Incorrect personal information.

If you find an error on your report, you can dispute it directly with each of the credit bureaus at the following links. 

You can file disputes by writing a letter that includes the following information:

  • Your name, address and phone number
  • The credit bureau’s name and address
  • The account number
  • A clear description of the mistake and why your disputing it
  • Any evidence that supports your claim

The process for disputing claims can take 30 to 60 days. 

How to Fix Your Credit in 30 Days

Disputing mistakes on your credit could boost it in as little as 30 days. Here are some other ways to improve it quickly. 

Get Family Members to Become Authorized Users: You can raise your credit score by getting family members with good credit to become authorized users on your credit score account. The credit card must be current and it must have available credit. If your family member is reluctant, you can offer to put something in writing to ensure their finances will not be compromised. 

Raise Your Available Credit: Asking existing creditors for an increased credit line can also boost credit scores.

Negotiate with Creditors: You can negotiate with creditors to see if they will accept a partial payment on debts that are owed and see if you can get them to change the classification on the debt to ‘paid’. You can also ask debtors that you have worked with before if they will forgive your late payments. 

If creditors agree to any of these arrangements, it will increase your credit score quickly. Just be sure to get everything in writing to make sure you have evidence of their agreements. 

How to Improve Your Credit Score in Six Months

While short term fixes can work to boost your credit score, if you have more time, you will be able to set a trajectory for an improved credit score in the future. Here are some tips for boosting your credit score in six months.

Related post: Best Tips For Increasing Your Credit Score [give it a boost]

Pay Your Credit Card Bill on Time: While you don’t have to pay off your entire credit balance immediately, making regular minimum payments will help you improve your credit score over time.

Balance Your Credit Portfolio: Credit bureaus also look for balanced credit portfolios with a mix of student loans, mortgage loans, car loans and consumer debt. If consumer debt alone dominates your portfolio, try eliminating that debt and/or balancing it with other types of debt. 

Aim for Long-Lasting Credit Accounts: While some consumers think any type of debt is bad debt, accounts that have been opened for a long time and handled responsibly will actually help your credit. It is advisable to try and pay off any shorter-term debts immediately and let longer term accounts such as car loans and mortgages take over.

Minimize Hard Inquiries: Every time an inquiry is made into your credit status, it hurts your overall score. It’s best to avoid inquiries if at all possible. 

Improve Your Debt Ratio: Credit bureaus like to see consumers with a debt ratio of 30% or less. Pay off as much credit card debt as possible to keep your debt ratio low. 

Pay off Credit Cards in Steps: When you pay off a credit card in full, it won’t show up as a paid off account for a couple of months. Therefore, it is best to pay it off in steps. 

Consider making one large down payment the first month and the remainder the next month. 

Request Credit Limit Increases: Credit limit increases can help reduce your debt ratio.

Use One Card for All Expenses: To truly improve your credit, use one card for all your expenses, even those you may have otherwise been using cash or a debit card for. Then make full payments each month. This will consolidate debt making it easier to keep track of and credit bureaus will see you are making responsible, ongoing payments. 

Keeping up with this behavior long term will continue improving your score over one-year periods, two-year periods and so on. 

Does Credit Repair Hurt Your Credit?

Credit repair can hurt your credit, especially if you don’t let a pro handle it for you. 

One mistake people often make is trying to fight disputes on their own. They may call a lender, credit bureau or collections agency to dispute a late payment on their account or another type of error. This will waste a lot of time and, ultimately, they will ask you for something in writing anyway. 

You are better off submitting a written request to begin with. 

Furthermore, if you do get a call from a collection agency or credit bureau or someone claiming to represent one of these agencies, stay off the phone with them. They can collect information that can end up doing your credit more harm than good. 

If you end up on the phone with them, request to follow up with writing and end the conversation as quickly as possible. 

You can also get in trouble if you use the wrong credit repair company. 

Some credit repair companies will dispute legitimate charges so they fall off your credit making for an immediate improvement. However, once the credit bureau investigates the disputes and find the charges were legitimate, if they will only reappear. What’s more, these actions can be considered and misuse of the process.

In other cases, a credit repair agency may advise you to file for an EIN number. An EIN number has the same number of digits as a social security number, so it isn’t hard for you to start rebuilding credit with this new number. 

However, this practice, known as file segregation, is not only often ineffective, it is also illegal. If you are found out, it can get you into way worse trouble than you were in when you started out. 

What are the Top Legitimate Credit Card Repair Companies?

Although many credit card repair companies are rip-offs, there are a few that will be able to help you out. Here are some that are recommended. 

Credit Saint: This New Jersey–based company is top rated by the BBB. They will work hard to improve your credit and they will give you a full refund if you don’t see results in 90 days. 

Sky Blue: Sky Blue is one of the few agencies that give you a free, no strings attached consultation to let you know if you need their services or not. If they think they can benefit you, they will work quickly to get you results.

Lexington Law: Lexington Law has been a leader in the tax repair industry for over 30 years. They are not the cheapest in the industry but they will team you up with a personalized rep to get your tax needs taken care of. 

Credit Repair: Credit Repair uses a process of checking credit scores, challenging possible errors and changing your report for the better. Although they have a track record for improving customer scores by 30 points on average, this is not guaranteed. 

The Credit People: You can opt for the Credit People’s service by making a $19 down payment. If you don’t start seeing improvements in 90 days, you can get your money back. 

What Is Credit Karma and How Do You Sign Up?

If you are committed to keeping your credit score in good shape, you will want to sign up with a service that provides regular, free reports. Credit Karma is a free, online credit monitoring service that will keep you on top of your credit status. 

To sign up, you will need to provide your name and address, date of birth and the last four digits of your social security number. Once you are signed up, you will be able to check your credit score, confirm hard inquiries and look for errors. 

Tips for Improving Credit

It is wise to adopt good credit habits and maintain them throughout your personal and professional life. That way, bad credit and credit repair will not be much of an issue. 

Here are some tips that will help you improve your credit and maintain better credit overall. 

Limit Credit Applications: As stated earlier, hard inquiries will hurt your credit. Every time you fill out a credit application, it will result in a hard inquiry that could bring your score down. Therefore, it is best to think about every credit application you fill out and ask yourself if it’s necessary before taking the plunge.

Pay Off Credit Cards Promptly: Be sure to make on time payments on all the credit cards and loans you have. 

Consider Enrolling in Auto-Pay: Enrolling in auto-pay will limit the possibility that you end up hurting your credit by forgetting to make a payment.

Check Your Report Regularly and Check for Errors: Errors can bring your credit score down. Check your report regularly and scan for errors to make sure your report is in the best shape possible. 

Open a Credit Card Account: Remember, no credit is as bad as bad credit. Therefore, you should always have at least one credit card account open. 

Open a Revolving Line of Credit: A revolving line of credit is similar to a credit card in that you can draw from it and pay it back until your credit limit is reached. Opening a revolving line of credit can also boost your business. 

There are different types of revolving lines of credit. Homeowners might use a Home Equity Line of Credit where home equity is used as collateral. There are also Small Business Lines of Credit that work just like a personal line of credit but they are for small businesses only. 

Get Fixed Installment Loans: Fixed installment loans can also boost credit. They build up payment history but they do not have a credit limit so you don’t have to worry about a maxed-out credit card harming your credit. 

Mortgages and auto loans are examples of fixed installment loans where the secured property works as collateral. These have better interest rates and a lower chance of risk than unsecured credit cards and personal loans. 

Fixed installment loans require a consumer to take out the loan for the full amount and principal is paid off over a set amount of time. It is low risk because you must pay the money back without running the balance back up.

Final Thoughts

Having a good credit report is important when it comes to being able to make purchases that can improve your quality of life. These tips will help you boost your credit so you can enjoy the freedom to spend freely. What moves will you be making to get those numbers up?

Additional research for this article was sourced from:

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