The Ultimate Guide To Credit Repair

So, you want to maintain the best possible credit score – who doesn’t? Odds are – if you’re reading this – that your own credit situation isn’t all that great. You’re now probably trying to figure out a way to get yourself out of your current situation without needing to take out a loan or mortgage.

If this describes you, the great news is that you’re hardly alone. Indeed, according to Experian’s 2015 VantageScore 3.0 data, about one-third of Americans have a credit score below 601.
The even greater news is that it’s perfectly possible to fix your credit score. Unfortunately, though, it won’t be an overnight job. It takes time to build a solid credit history, and you’ll need to invest a lot of time and energy into correcting any errors and tackling problem areas such as overspending. But hey – it’ll be worth all of that effort to be able to reflect on a brilliant credit score once again.

Things you need to know about credit repair.

First of all, it’s essential to be aware of your credit score, as well as understanding the balance on your cards or any of your other credit accounts.
You should also determine which of your revolving accounts have the highest utilization – this being the term for the amount of credit you’ve used versus your credit limit. You’ll then need to get to work on lowering the utilization of these accounts to restore them to good standing.

Ensuring the continued sound health of your credit accounts is also vital. After all, it’s the development of a positive credit history over time that will really help you to take out credit in the future that would otherwise be unavailable to you. Bear in mind that another key factor in your credit score is credit age, which means you should be careful to avoid closing too many accounts if you want to achieve genuinely effective credit repair.

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The very first step is to perform a credit check.

You won’t be able to ascertain the problem areas that you need to focus on if you don’t even have copies of your credit reports and credit scores. Thankfully, it’s free to request them from the three biggest credit bureaus – Experian, Equifax and TransUnion – once a year in accordance with the Fair Credit Reporting Act.

We urge you to obtain your credit reports from all three of these main credit reporting agencies, as they may not all contain the same data, which will enable you to take a more well-rounded look at your credit situation and correct all possible inaccuracies. It’s not just your financial information in such reports that need to be accurate – the same goes even for basic details like your name, birthday and address. Also included in these reports are any financial legal issues you may have, such as a bankruptcy, judgment, lien or wage garnishment.

The biggest part of any given report, however, will be devoted to creditor information, including the various accounts you have such as loans and credit cards, as well as their status (open/closed, in collections), balances, credit limits and payment details. You may also see dates of missed payments or when the accounts were sent to collections.

 

The five big things that determine your credit score.

It is the following five major categories that make up a credit score:

  • Payment history (35%) – your history of repaying debts on your accounts
  • Credit utilization (30%) – the amount of debt you’re carrying relative to your credit limit
  • Length of credit history (15%) – the period for which you’ve had active credit accounts
  • Types of credit (10%) – the range of accounts you have
  • Credit inquiries (10%) – how many inquiries have been made into your credit profile

Don’t expect your credit to be repaired overnight!

Yes, we mentioned it above, but it bears repeating: as anxious as you may be to begin fixing your credit score and achieving fast results, truly comprehensive credit repair will never be the work of a moment.

Your credit history, for instance, obviously can’t be lengthened straight away. However, there may at least be some scope to begin bringing your credit utilization into a healthier range. The rule of thumb is to keep your credit utilization below 30%, and ideally 10%, to demonstrate to creditors your ability to responsibly manage your available credit without maxing out your cards.

Otherwise, we’re afraid to say that credit repair is a very much long-term job. Some credit mistakes can be detrimental to your score for years, although it’s good to know that they do eventually age off. The likes of late payments, foreclosures, short sales, and repossessions, for example, all remain on your credit report for about seven years. A bankruptcy, meanwhile, won’t age off until 10 years from the filing date, or seven years if it’s a Chapter 13 case.

What about inaccurate negative information?

Well, you’re in luck here, as some of the most dramatic results that you can achieve from the credit repair process can be attained simply by fixing inaccurate items on your credit report.

You can feel a little lighter knowing that a credit reporting agency is required to respond to a dispute within 30 days, although you may be waiting for as long as 45 days. Nonetheless, that’s far preferable to the many years it takes for accurate derogatory information on your reports to age off.

If the credit reporting agency agrees that the information you’ve highlighted is inaccurate, it must remove the error immediately. A Federal Trade Commission study in 2012 found that almost eight in 10 (79%) of people who disputed a mistake on their credit reports were able to have it removed.

It’s well worth the effort to achieve a brilliant credit score.

There are plenty of different things you can do to clean up your credit score. From pinpointing the biggest problems with your credit reports to cleaning up any inaccuracies, or simply by building a positive credit history — which can be done by controlling buying habits to bring down credit card balances.

Maintain good financial habits over time, and you’ll be in a great position to continue improving your credit scores. You’ll be glad you took the time to undertake such diligent credit repair once that crucial loan or mortgage approval comes through!

Disclaimer: Our service is not intended to be, nor should it be construed as financial advice. We help our readers make informed decisions via impartial information and guides. Where appropriate, we may introduce partner companies who can provide services relating to financial products.