Help Me Fix My Credit Now!
Once you have a problem, fix it right away. Would you drive your car without making sure that it is running correctly? You can fill the gas by yourself and maybe do some minor repairs. However, if you have serious problems or need a basic checkup, consult with a professional.
You may not be aware of your credit problems or score, until a lender rejects your loan application. Neglecting your credit costs you money. Your credit is important, because it determines your ability to obtain loans and the price you'll pay for them. This includes mortgages, auto loans, credit cards, and personal loans. Bad credit can prevent you from renting an apartment, finding a job, or buying a good or service.
Credit problems are not uniform, and vary in their difficulty to resolve them. Some problems you fix yourself, others require professional assistance. Here are the basic steps to fix your credit:
- Review Your Credit Report
- Choose the Tactic to Solve Your Debt. Tactics to Erase Derogatory Items
- Get Rid of Bad Debt
- Help Fix My Credit? –Use Good Financial Habits
Review Your Credit Report
You are entitled to a free credit report from each of the major three credit bureaus once a year, or anytime a lender rejects your application. Your free credit report does not include your credit score, but does include your credit history. In addition to having details of your active accounts, the report includes:
Positive Closed Accounts: A positive account is any loan or reported credit that does not contain any late payments. Positive items that remain on your credit report help you build a good credit score.
Derogatory Accounts: Negative items include bankruptcies, judgments, collection accounts, charge-offs, and late payments. In general, these items continue to appear on your credit report for 7 1/2 years after the date of your first delinquency. (If a creditor sells an account to a collection agency, then that item will be recorded twice, but remain on your report for the 7 ½ years beginning with the original debt.)
Inquiries: Whenever a lender or creditor pulls your credit report in order to determine if you qualify for a loan a hard pull is recorded, and stays on your report for about 2 years. Hard pulls lower your score, slightly.
Step 2: Cleaning up Your Credit Report
Two methods of improving your credit score are disputing accounts and a negotiating a pay-for-delete settlement.
Mistaken Items: If your credit report includes accounts or items that do not belong to you or contains faulty information, then dispute those them. You can do this by sending a dispute letter to the credit agency or through an online dispute request. The credit agency can reject your request if they feel it is frivolous, otherwise they must investigate your complaint within 30 days. For more information read the Bills.com article credit report dispute.
Derogatory Items: Negative or derogatory items are removed based on the time limitation, which is 7 years for most items, 10 years for bankruptcies and until the statute of limitations run out for a judgment. However, if you have made a settlement or paid off a negative account, then you can send a dispute letter to the credit agency and the creditor. If the creditor does not respond then the credit agency will remove the account from your report.
DIY or Credit Repair Firm?: You can dispute items by yourself, or use a credit report firm. If you have many items on your credit report that need disputing, you may need professional help. Read the Bills.com article about one credit repair company, Lexington Law.
Pay for Delete Settlement
You can negotiate settlements with your creditors and ask that they remove negative information from your credit report. This is known as a pay-for-delete settlement. Your creditors are not obligated to agree to a pay-for-delete, but it is worth trying.
Step 3: Get Rid of Bad Debt
To fix your credit, deal with your delinquent and collection accounts. Making a payment on an old delinquent debt, including a charge-off, will re-age the debt and lower your score in the short run. It is best to negotiate a settlement, preferably a pay-for-delete, or at least a paid in full.
Depending on your financial situation and the extent of your debt, consider different relief options.
- Credit Counseling and debt management programs have a minimal impact on your credit score, because you keep making payments.
- Debt Settlement programs have a strong negative impact on your credit score. You stop making payments to the creditor and a debt settlement company negotiates a settlement.
- Bankruptcy has the most negative impact on your credit score.
Step 4: Help Fix My Credit? Use Good Financial Habits
To fix your credit score you need to build good personal financial habits. Your credit score is based on five criteria, the most important being timely payments and your debt level.
Pay on time: Create a budget, using the Bills.com budget guide. Get in control of your cash flow and make it your goal to have enough funds to cover all your payments.
Too much debt: Pay off your debt as quickly as possible. Making minimum payments on your credit cards lengthens the payoff period, sharply increases the cost, and makes for greater utilization of your credit limits. Accelerate your payments as much as possible.