Despite the promises of some credit repair companies, cleaning up negative credit isn't magic. Items in collections will remain on your record for years. And paying bills on time is the only certain way to repair credit. The steps you can take to improve your ratings such as disputing errors and rearranging your credit take time and a lot of paperwork. But, they're not difficult to do and you can save money if you tackle these chores yourself.
The Quickest Fix is Your Credit Report
The first step to credit repair is downloading your credit reports from the three credit agencies: Experian, TransUnion and Equifax. Consumers may receive one free copy of each report annually from annualcreditreport.com. You need all three because an error may appear on one that isn't on the others. Fix an error by writing a dispute letter to the credit agency that reported the error along with documentation supporting your claim. If there are errors, such as paid debts marked unpaid or accounts that don't belong to you, you can boost your credit by getting them off your report.
Credit Adjustments Can Help
There are ways you can adjust your credit to make things look better. These do not include closing accounts or opening new credit cards. They include shifting debt from a high balance card to one with a lower balance to get all your balances as low as possible relative to your credit limit. As MSN Money points out, credit utilization -- meaning how much of your balance is in proportion to your credit limit -- is a big factor in your credit score. Also, if you transfer money to an installment loan from a credit card, the scoring formula treats these loans less harshly than credit card balances.
Start With Today
Once you've cleared off any mistakes and adjusted credit, you simply have to get current and stay current. If you need help doing this, then set up automatic payments or visit with a credit counselor. MSN Money recommends those that operate through the Association of Independent Consumer Credit Counseling Agencies and the National Federation for Credit Counseling. Over many months, you can build a solid credit history which will diminish the impact of past blemishes and help your credit rating climb.
Don't Look Back
To avoid lawsuits and keep a clean conscience, you can pay off debts that are recorded as collections on your credit report. But it won't help your credit rating. If you need to choose where to put money, put it toward current bills first and pay the collections off later. They will remain on your record for seven years, but if you have a clean record since they they will lose importance in the eyes of creditors.
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