Repairing credit takes time. There is no magic bullet that will erase all negative marks on a credit report if they are accurate. The goal for credit repair is to get back on track financially with consistent and responsible steps to fix past credit problems and work toward improving future credit reports. Negative marks don't stay on a person's credit history forever and adding positive financial information to the reports will help balance out negative credit.
Check for Mistakes
Check your credit report every six months for accuracy. Checking a credit report defends a person not only against identity theft and fraudulent charges, but billing or reporting mistakes from lenders. If an error is found, individuals should contact the credit reporting agency and the lender to have the information changed. Even simple errors such as a lender stating that they closed the account rather than the applicant can hurt a credit score.
Lifestyle Changes
Change any financial bad habits from the past that may have contributed to credit problems. Circumstances are different for each individual. Some may have a reduced credit score due to improper spending and budgeting while others may have had financial hardships due to illness or loss of employment. But all circumstances can benefit from creating a household budget, living within our means and starting a savings for future emergencies.
Communication
Contact current lenders to work out payment plans. If paying outstanding debt is a problem, contact the creditors as soon as you know that you are unable to make a payment. Not only will it show that you are willing to work with them, the lender may offer a better payment plan to help avoid late or missed payments from showing up on a credit report.
Debt Repayment
Avoid applying for new credit cards to help pay off outstanding debts. This practice may increase debt and can negatively affect a credit score. Aim for paying off current debts or loans and bringing them well below the credit limit. Having credit cards with high balances or having too many open lines of credit can hurt a credit report. Making regular payments on current debt is the best way to repair a credit score.
Closing Accounts
Analyze your situation to find out which accounts to close and which ones to leave open. Closing open lines of credit or loans can negatively affect a credit score if done too quickly. If your goal is to avoid future debt and you have a problem with spending, it may be best to close accounts after they have been paid off. Alternatively, it can actually help a credit score to keep a couple of long-standing accounts open. Close any extra accounts after they have been paid off, but try to avoid closing more than one account every six months.
Credit Repair Companies
Investigate a credit repair company before doing business with them. There are agencies that claim to fix your credit for a fee. But they cannot remove accurate information from your credit report even if it's negative. Check with a nonprofit credit counselor before doing business with a credit repair company or debt consolidation agency to find out what credit repair options are available.
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