Credit repair can be a frustrating experience, but with the right knowledge, you can set off on a path to perfect credit. The following ten tips will help you along your way.
Change Your Ways
I know you’ve heard this a million times, but one more time isn’t going to hurt. In fact, it is going to help. The first tip to improving your credit is to start paying your bills on time. Do whatever it takes to remind yourself not to be late. The occassional late electric bill probably won’t harm your credit, but miss one payment on a credit card and you will negate all of your credit building efforts. Of course it is best to pay down your credit cards as much as possible, but at the very least, pay your monthly minimum.
Dispute, Dispute, Dispute
Dispute entries on your credit card. Does your credit report show a late payment and you don’t recall being late? If so, file a dispute. Most of the credit reporting agencies make it easy to dispute an entry online. Those online dispute systems are there for you to use, so don’t be shy.
Check Your Utilization
If you have credit cards, make sure their utilization is low. Over 30% of your credit score is determined by how much of your available credit is being used. Ideally, you want your utilization to be under 16%. So, if you have two credit cards and each has a $500 limit on them, you want to make sure your combined balance on the two cards is below $1,600.
Use Secured Credit Cards to Build Positive History
Start building a good credit history. A good protion of your credit score is determined by the average age of your accounts. The older your tradelines are, the better. If your credit is too beat up to get new credit, look into getting a secured credit cardit card. A secured credit card is where you deposit a certain amount of money as collateral and then you are issued a credit card with a credit limit for the same amount as your deposit. Another credit card tradeline can also help your utilization go down.
Introduce Yourself to a Bank Manager
Develop a relationship with a local credit union or bank. Speak to the manager and ask if he or she can help you to rebuild your credit. Often times they will allow you to take a small loan or even give you a small balance credit card to give you some positive tradelines. Your bank manager wants you to improve your credit, so he can eventually loan a good amount of money to you.
Ask for Forgiveness
Start writing goodwill letters to everybody that has a negative entry on your credit report. A goodwill letter is almost like an apology letter. In this letter, you will explain why you were late and what steps you have taken to never be late again. You are also asking if they can find it in their hearts to remove the negative entry. This can work with missed payments and someties with collections that have been paid off. It does not work well with accounts that are greatly passed due and you still owe a lot of money on them. Do not stop at just asking once. If the creditor says no, write again the following month. You may get seven no answers in a row, but the eighth one is read by somebody in a good mood and wanting to do a good deed.
Validate Those Collections
Get validation of all collection debts. If there is a collection listed in your credit file, write a validation letter to the collection agency. A validation letter is exactly what it sounds like. It is you asking them to provide details about the debt. By law, validation requests must be answered within 30 days. If a collection agency fails to respond, send a letter to the credit reporting agencies, along with proof you mailed the letter (certified mail receipt). By law, the credit reporting agency must remove the entry if the creditor does not respond. Often times, a collection agency that has already been paid will not take the time to respond.
Keep ’em Open
Don’t close your credit cards. Despite what your mom might tell you, closing credit cards can be a bad thing. Remember in tip #4 we told you about how it’s good to have older accounts? Closing a credit card you’ve had for years will lower your average age of accounts and you don’t want that to happen. You are better off sticking that old credit card in a drawer than you are calling the credit card company and shutting her down.
Pay for Delete
Offer to pay collection agencies in exchange for them deleting your account. A collection agent wants to be paid. Write an offer letter telling them you will pay in full or make an offer to pay a discounted amount in exchange for them removing all data from your credit files. Be sure to make the offer in writing and get the accptance in writing. If they fail to delete your record, you will need their letter to show to the credit reporting agencies.
Limit Your Credit Applications
Limit the amount of credit you apply for. Each time you fill out a credit card application, your credit score takes a dip. Each of these inquires will remain on your credit file for two years. Also, creditors are less likely to give you credit if they see you are applying all over town. They see this as a red flag that you need money and need it now.