How to Repair Credit on Your Own?
Many people do not realize it, but credit repair is something everyone needs to perform, no matter what their credit standing may be. It is true that repairing or “fixing” your credit is mostly needed by people below the “fair” credit rating.
However, if you’re on the “good” to “exceptional” rating, just how important credit repair can be, and is it possible to repair it yourself?
What Must Be Done to Repair Your Credit
Request for a Free Credit ReportThe three credit bureaus – Equifax, Experian, and TransUnion – have to provide you with a free copy of your credit report every 12 months.
You can send a request by calling any of these agencies. But the fastest way is to fill out an online form. Requesting by mail would require your social security number, and you wouldn’t want that information exposed. It is advisable to request a credit report from all three bureaus.
They should contain the same information, but for various reasons, no credit report is totally identical. Some lenders would report to only one agency, and although it should reflect on your credit report, there may be some discrepancies.
Take note that some states are required by law to provide two free copies per year. In addition to the annual credit report, there are other reasons why you may qualify for a free copy.
If you meet the following requirements, you can request another copy instead of waiting for your annual free copy anniversary:§ Individuals who have been unemployed and intend to apply for employment within 60 days;
§ Individuals receiving public welfare assistance;
§ Individuals who suspect their credit report contains inaccurate information due to fraud;
§ Individuals who have been subject to adverse actions, such as being denied credit or insurance within the past 60 days;
§ Individuals who have placed a fraud alert on their credit reports.
Get a Free Credit Report online
if you have already utilized your free annual credit reports from all three credit bureaus, and if you do not meet the other criteria, you can take advantage of free credit reports online.
These online companies typically make money through advertising and thus offer credit reports for free. But be mindful. If the online form mentions any form of charge before any service is rendered, look somewhere else.
If part of the registration asks for your credit card information for a free trial period, make sure you cancel the account or subscription as soon as you receive your free copy.
Order a Paid Credit Report
You also have the option to order your credit report from the credit bureaus for a fee, which varies between $1 and $12 depending on which state you’re in.
Identify Which Needs Repairing
Once you have a copy of your credit report, it’s time to pinpoint which items on your credit report are bringing your score down.
The credit report can be quite confusing, so it would be best to take some notes or even color-code the highlights on your report.
Dispute Erroneous Information
You may have encountered advertisements promising to correct or delete inaccurate information on your credit report.
However, these are classic examples of false advertisements since erroneous information can only be disputed.
If you find some entries on your credit report of transactions that you did not make. These are considered fraud, and fraudulent items can be disputed on your credit report.
On the other hand, if somebody opens a credit account without your knowledge, this becomes identity theft, which can also be taken off your credit report by filing a dispute.
Traditionally, you would be required to send a dispute via snail mail to the credit bureau where the dispute or error has been spotted.
Nowadays, you can simply fill out a form online. You will be asked to provide supporting documents to back your dispute.
Via post mail, make sure to keep the original copies and simply provide copies of your documents.
Dispute Incorrect Late PaymentsData
entry mistakes happen, and this can be the case for your mortgage lender when they report a late payment when it was actually paid on time.
The good news is you can dispute these incorrectly entered late payment entries, whether in current or closed accounts.
Ask Nicely and PolitelyA way around some disputes on your credit report would be to ask the lender nicely to have a late payment record removed.
Of course, this is not always the case, but there are instances where the cause of your late payment is not your irresponsibility.
Your bank had a power interruption, or you totally forgot because of a grave situation. You can explain to the loan company why the late payment occurred and ask them nicely to clear it off your record.
They would most likely check your payment history, and if they determine that you have been paying on time, except for this recent incident, they would most likely grant your request.
Increase Your Credit Limits
One factor affecting your credit score is your credit utilization ratio or credit utilization rate. The credit utilization ratio is computed by simply dividing your total debt by your total available credit, expressed in percentage.
For example, if your credit limit for a certain credit card is set to $7,500 and your current debt is at $5,000, your credit utilization ratio for that particular credit account would be quite high at 66.67 percent.
However, if you can increase your credit card limit to $10,000 the following month, keeping the same debt would lower your utilization ratio to 50 percent.
Take note that anything above 30 percent can cause your credit score to drop. To increase your credit limit, you can contact the credit card company and ask nicely.
Open Another Credit Card Account
An average American would keep two to three active credit cards at a time. One obvious reason would be to have more financial resources, especially for large purchases or emergency situations.
A few people realize that keeping a second or third credit card can positively affect their credit scores. The logic is to lower your credit utilization ratio.
For the above example, if you can open a second credit card with the same card limit of $7,500 (assuming you wouldn’t have a debt on the second card), your utilization ratio would go down to 33.33 percent.
This means you only need to pay off $1,000 to lower your ratio to 26.66 percent. Be careful not to apply for too many credit cards.
Each time you apply for credit, a “hard inquiry” will be listed on your credit report, and if you have too many within two years, your credit score may suffer.
Ride on a Trusted Friend’s
High Credit StandingSuppose your spouse or a trusted friend or family member has a credit card with very low utilization and has a healthy payment history.
That person’s credit card can help your credit score to go up. From a credit score point of view, you will automatically benefit from his or her good credit standing and on-time payment history.
Be mindful though, that if your friend makes a late payment or eventually gets a higher utilization ratio, your credit score will also be at stake. Therefore, you really need a trusted friend for this. You can volunteer to monitor his or her payment to make sure it’s always on time.
First In, Last out, if you would ever need to close a credit account, keep the oldest ones and close the newest cards instead.
Your age of credit history may have little impact on your credit score, but it has an impact nonetheless. Unless it is for a grave reason, you wouldn’t really want to close a credit account, even (and especially) those you hardly use.
Commit to Pay Your Bills on Time
Needless to say, it is our responsibility to pay our bills on time, not only because it affects our credit score, but simply because that’s the right thing to do.
Even one late payment can hurt your score, so be very thorough about your payments. If it would happen again that you would not be able to pay a bill on time.
Be smart about it. Your credit report will show which companies report late payments. For mortgage lenders and credit card companies, however, you can assume that they report late payments all the time.
What Could Hurt Your Credit Scores
The following will definitely hurt your credit scores, so try to avoid them at all costs.
- Paying late or not paying at all.
- Having an account charged off.
- Having an account sent to collections.
- Defaulting a loan.
- Filing for bankruptcy.
- High credit card utilization ratio or high credit card balances.
- Maxed out credit cards.
- Having your house foreclosed.
- Applying for too many credit cards or loans