The bad credit repair guide
So you’ve had some rough times in the past with your credit? Don’t feel too bad, many of us have. Whether it be an unexpected job loss, healthcare costs or unexpected expenses many of us find ourselves up against the wall at some point during our lives.
Unfortunately, one mistake – no matter how small – can damage your credit report for up to ten years. Many of us don’t even realize this until we go to take out a loan and find out that we don’t qualify because of our credit score.
So what can you do to help repair your credit? There is no magic fix – and it won’t happen overnight – but if you are willing to work on it there are things you can do that will begin to improve your credit the very first month you start. In 6 – 12 months time you can really notice a difference by following a few simple steps.
#1 – Pay your bills on time, every month. Make up a budget, write out a calendar, sacrifice that morning coffee – whatever it takes, just make sure those payments make it to the creditors by the due date. Consider using online bill pay that many of them offer – it’s usually free and a lot faster than the post office!
#2 – Pay down your debt. If you have a lot of debt consider taking on a second job for a while to pay some of it down. Your debt ratio is one of the major factors in your credit score. You should always aim for between 10-20% maximum utilization of your lines of credit; anything above this and it will hurt your score.
#3 – If you have accounts in collection, work with the collectors – but always get it in writing. Many collection agencies will remove the negative information from your report in exchange for pull or partial payment. Don’t be afraid to ask – they bought the debt for pennies on the dollar and so they have plenty of incentive to work with you.
#4 – Obtain your free, annual credit report and look for errors and fix them. Almost everyone has at least one error on their report. The credit reporting industry is notorious for having data that isn’t correct. You are entitled to a free credit report from all three bureaus once a year — use them to dispute information you think isn’t accurate.
#5 – If you can’t afford your monthly payments, work with a non-profit agency to help devise a debt plan that fits your income level. Never consider bankruptcy except as a last resort – bankruptcy will kill your credit score for a period of ten years.
The process is not going to be easy – but you can do it if you set your mind to it. Setup a family budget and stick to it; keep track of where your money goes; and most of all get control of your debt. One year from now you could see your credit score increase by 200 or more points — not to mention your peace of mind increase many times over!
You can do it! Start today!
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March 27th, 2008 at 1:48 pm
Something that is kind of along the lines of #3 is that the truth of it is that they don’t want you to default on things any more than you do: they want their money and they will go to great lengths to get it. If you make it clear you have good intentions, you can generally avoid getting lots of late marks etc from them.
March 27th, 2008 at 7:44 pm
Here is something else to try. If (and this may be a big if) you can keep yourself from using it, ask credit card companies to raise your credit limit. Credit agencies look for the ratio of debt you carry on revolving loans. Ideally you don’t want to carry any debt on credit cards, but if you must, raise your limit so that this carry amount is 50% or less of your available limit. Obviously, the lower ratios are better, but staying under 50% will help your credit score.
March 29th, 2008 at 4:11 am
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