How to Repair Your Credit
No matter how bad your credit situation is there are always steps you can take to make it better. Everyone’s situation is unique, so what might be the best thing for you right now, may not be the best thing for someone else.
To repair your bad credit, you must find a starting point. The best way to do that is to obtain a copy of your credit reports from the 3 major credit reporting agencies, also known as credit bureaus. You will also need to know what your credit scores are. Once you have your reports, you’ll want to make sure all the information is accurate. There are mistakes in about 80% of all credit reports. If you find any accounts that you are unfamiliar with or are reporting incorrectly you should dispute them with the credit bureaus.
Creditors are notorious for reporting erroneous information on your credit reports. So, even if it’s just a small error; that gives you the right to dispute it. It’s important to note that whether the account is actually yours or not makes no difference on their responsibility to verify it. If the account can’t be verified, it must be deleted. The credit bureaus get thousands of disputes each day and many times they don’t do a very careful job of investigating items you’ve disputed. So, it may take a few rounds of letters until the credit bureaus remove the negative information. Be patient and wait at least 30-35 days before sending another round. Do not give up. It may seem like just one or two small errors that they are falsely reporting about you – no big deal, right? Wrong! Just one error can cause your credit scores to suffer immensely and could end up costing you thousands of dollars. This is very serious business. It’s extremely important to make sure everything on your credit reports is being reported correctly.
Another thing you should do is pay off the most recent past due accounts. Be careful making payments on older charged off accounts as paying them could possibly bring your scores down even further which means they can report the negative account for 7 more years.
You will also want to try to get an agreement with the creditor to update it to “paid as agreed” or remove the account BEFORE you pay it. It’s much harder to get it updated or removed after you pay it because you don’t have much leverage.
Another important part of raising your credit scores is to keep your existing balances below 30-40% of your credit limit. You’ll also want to minimize the number of inquiries you make by not applying for credit unless you absolutely must. Use your inquiries wisely and sparingly, as applying for too much credit in a short amount of time can be very damaging to your credit scores.