How Do I Repair My Credit Score?
When you have bad credit, it can be very expensive to finance. There will be many lost opportunities when financial institutions refuse to give you new credit. And when they do give you credit, the interest rates will be very high.
Repairing your credit score in the short-run will save you money in the long-run. This will re-invigorate your financial health and wealth possibilities. There are many options that help you to repair your credit score.
Why Do you Have Bad Credit?
The first step to credit score repair is to make a serious analysis of why you have bad credit. Is it due to bad habits in spending too much? Did you acquire too much debt and max-out your credit cards? Was there one drastic event that proved to be the “Straw that Broke the Camel’s Back?”
Request Free Credit Report
In order to fix your credit, you will need to find out what is in your credit report. You have the right to order one free credit report each year.
Contacting the Credit Bureaus to Fix Errors
When you check your credit report, make sure everything is accurate. Under the “Fair Credit Reporting Act (FCRA)”, you have the right to an accurate credit report.
Repair your credit score by removing inaccurate, incorrect, or updated information:
- Incorrect balance
- Inaccurate late payment
- New credit accounts not updated
- Inaccurate name
- Someone else’s information
- Wrong information from someone with similar name
- Wrong accounts
- Multiple listings for same account
- Creditor you have never contacted (Might be a case of identity theft).
Write a “credit dispute letter” to question any errors you find in your credit report. The three credit reporting agencies – Equifax, Experian, and TransUnion – are legally required to respond to any requests you make to remove inaccurate information.
Develop Credit Repair Strategy
If your bad credit is due to mismanagement of your finances, then develop a strategy to minimize your monthly expenses and reduce your debt load:
- Pay off highest interest rate credit cards
- Minimize “Debt Utilization Ratio” by paying off credit cards.
Carefully Look Before You Leap
There are many myths about how to quickly repair your credit score. Be careful about making a rash decision that might backfire in the end.
I’ll just close my accounts!
While this knee-jerk reaction seems to make some sense, when you understand how the “Debt Utilization Ratio” affects your credit score, then you will realize that closing an account will probably reduce the amount of credit available to you and damage your score.
I’ll repay old debts!
Unless you negotiate with the collection agency to ensure that they will remove negative marks on your credit score, this strategy might “Open up a can of worms” and could lead to lawsuits.
Other Ways to Repair Credit Score
Update positive account information.
Fix negative public records – liens, judgments, and bankruptcy – these have less effect after three years; the bankruptcy remains on the credit report for seven to ten years.
Make sure that “old delinquencies” – late payments, charge-offs, and collections – fall off record after seven years; check the “statutes of limitations” for your state.
When you have multiple types of credit – credit card, mortgage, and business – this is a sign of responsibility that can increase your credit score. “Revolving credit” carries a more substantial weight than “Installment credit.”
Rapid Rescoring Services
These companies act as your representative in dealing with the credit reporting agencies to resolve disputes. When you have written documentation proving your case, then this could help you repair your credit score.