How to Repair Your Credit

Credit repair can be a vital step in planning for your financial future. We take a look at the basics.

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These days just about everyone is checking credit. Credit card companies check credit before giving you a credit card. Banks check credit before giving you a loan. Even employers check credit before giving you a job. Sadly, bad credit can leave you jobless and homeless. The good news is, a bad credit history can be fixed.

Order Your Credit Report and Score

The first step in credit repair is ordering your credit report. Your credit report contains a detailed history of all your credit accounts, including balance and payment history. You’ll need your credit report to figure out what needs to be repaired.

Three major credit bureaus – Equifax, Experian, and TransUnion – collect and compile your credit information into credit reports. You can order a copy of your personal credit report from any (or all) of these credit bureaus.

You’ve likely seen offers for a free credit report online. However, most of these offers require you to sign up for a paid subscription for another service.

Fortunately, the federal government gives you the right to a free annual credit report that has no strings attached. You can access this credit report via www.annualcreditreport.com. Each year, you’re able to access one credit report from each of the credit bureaus.

The information in your credit report is given a number based on how good or bad it is. This number is your FICO credit score. The government has not made a law that will allow you a free credit report so you can see how good your credit score is. So, if you’d like to know your credit report score, you will have to purchase it. Your credit score isn’t necessary for repairing your credit, but it can help you gauge how bad (or good) your credit is.

Get Rid of Bad Information

Once you have your credit report, review it carefully. Look for anything that’s wrong with your report, like accounts that don’t belong to you or payments reported late that were actually made on time. If you find anything wrong on your credit report, dispute it with the credit bureau issuing the report. Instructions for making disputes will be included with your credit report.

When you make a credit report dispute, the credit bureau must investigate your claim and remove the information from your report if it’s indeed wrong. Getting this incorrect information taken off your credit report is one of the easiest ways to improve your credit score quickly.

Past due accounts and high balances are two of the most damaging things to your credit. Next, you need to get current on your accounts and pay your balances down. Based on your budget, you can figure out the best way to take care of your past due accounts. It’s best to get first get current on past due accounts, then pay down your high balances.

Seek Professional Help

Many people have a hard time figuring out how to best pay off credit card debt. Using a non profit consumer credit counseling service can help in this situation. A credit counselor works with you to figure out how much you can afford to pay on your debt each month. Then, based on what you can afford, the counselor contacts each of your creditors and negotiates a lower interest rate and monthly payment.

Another alternative for paying off your creditors is using bad credit debt consolidation. Consolidation involves using a loan to repay your debts, then making a single monthly payment toward that new loan. Debt consolidation can improve your credit immediately because all your bad accounts are brought current and below their limits at a single time.

In your quest for better credit, you might consider credit repair services. These businesses make tempting promises, but often have dishonest practices for repairing credit. The Federal Trade Commission, whose mission is to protect consumers, says that it has not yet seen a legitimate credit repair service. Not only that, the FTC receives the most complaints about credit repair scams. It’s in your best interest not to waste your time or money with a credit repair service.

Wait For the Results

You can ruin your credit in just a few short months, but repairing it can take much longer. Your credit will improve as you start replacing the negative information on your credit report with positive information.