How to Repair Your Credit Rating Fast

This is not going to be some overnight credit repair trick. This will take effort and you will have to pay your bills. I know we have all heard crazy claims over eliminating your debt and repair your credit, but unless you apply the following techniques, you will likely remain in credit hell for years to come.

Instructions

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1: Check your reports, all of them. There are three major agencies that handle all credit reporting: Transunion, Equifax, and Experian. Be sure that all of the information in your file is accurate and up to date.

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2: Fix any inaccurate information. If you find things that are not correct on your credit reports, you have the right to have them removed. This doesn't mean you can dispute anything bad on your report, only the bad things that are actually wrong by honest mistakes.

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3: Pay all of your bills on time or early. As soon as you go past the due date, you begin racking up fees that will make it harder for you to get ahead. Once these fees start, they tend to snowball into unmanageable amounts and more late payments.

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4: Don't apply for new credit until you really need it. Inquiries on credit reports tell potential lenders that you have applied for a loan or credit elsewhere. The lender may be less inclined to loan money because they don't know if you had been approved for another loan that would send your debt ratio over their limit.

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5: Pay more than minimums any time you can. Reducing the actual balance on your accounts will lower the debt ratio that is factored in to your credit score. The lower the debt ratio, the better the score, so as your balances drop your credit rating goes up and you become less of a risk to new lenders.

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6: Beware of quick fix scams and fairy tales. These claims are false, there is no overnight method to fixing bad credit. It took time to get into a bad credit mess, and it will take time to get out.

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How Long Is a Mortgage Default on a Credit Report?

Whether financial distress leaves you unable to continue making mortgage payments or you opt to strategically default on your mortgage loan, your failure to adhere to the terms of your loan contract appears on your credit report as derogatory information and damages your credit score. The consequences of your mortgage default and your lender's policies can sometimes impact how long the negative information remains within your credit history.

Missed Payments

Each lender maintains its own standard regarding how many missed payments constitute a mortgage default. Regardless of how many payments you missed before and after your lender declared your loan in default, each missed payment remains a part of your credit history for seven years. In addition, missed payments have a more significant derogatory effect on your credit rating than any other single factor.

Losing the Home

If your mortgage default resulted in a foreclosure, the legal record reflecting the foreclosure appears on your credit file for seven years from the date the foreclosure occurred. Because foreclosure occurs after you miss several loan payments, you can expect a foreclosure record to linger within your credit history for slightly longer than missed payment records -- even though the record adheres to the same seven-year reporting period.

Mortgage Deficiency

If your home is worth less than your lender can recover at the foreclosure auction or through a private sale, you still owe your lender the difference between the sale price and your loan balance. Depending on the statute of limitations for debt collection lawsuits in your state, your lender may have up to 10 years to sue you for this deficiency. After it wins the lawsuit, a record of the court judgment connected to the original default appears on your credit report for an additional seven years. Because a court judgment's reporting period begins on the date the judgment was awarded, your credit report could reflect evidence of your defaulted mortgage for much longer than seven years after you stop making payments.

Credit Reporting Exceptions

If your lender agrees to work with you and allow you to redeem your defaulted mortgage, it may also modify any previous negative reports to the credit bureaus. Although many lenders refuse to modify consumer credit reports, some lenders will agree to do so in exchange for payment. It is more cost-efficient for a lender to allow you to redeem your home rather than seize it through foreclosure. In addition, if you successfully dispute negative information related to your mortgage default with the credit bureaus and your lender does not verify the information's accuracy, the Fair Credit Reporting Act states that the credit bureaus must delete the disputed information from your credit history -- resulting in derogatory reports related to the mortgage default disappearing before the reporting period expires.

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The Three Major Credit Reporting Agencies

When someone applies for credit, the lender nearly always obtains at least one credit report or credit score to check the applicant's creditworthiness. Three major credit reporting agencies provide this information for a fee.

Identification

Equifax, TransUnion and Experian are the three major credit reporting agencies. They maintain electronic records about the amount of credit each consumer has along with the payment record.

Function

The three agencies function very similarly. Many lenders use a combination score, compiling results from all three, while others rely on one credit bureau. The preferred bureau can vary by state.

Yearly Free Report

These agencies normally charge a fee to provide reports, but the federal Fair Credit Reporting Act requires each of these agencies to provide a person with a free copy of her own credit report upon request once a year.

Credit Denial Free Report

The agencies also must provide a free copy of the credit report if a person was denied credit in the past 30 days, as long as a credit report was used in the decision.

Contacting the Agencies

Up-to-date contact information for these agencies can be found online. See the Resources section for a link to a site with current information for all three.

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How to Fix Personal Credit History

Fixing your personal credit history by increasing your credit score may require serious effort on your part. Credit scores range between 300 and 850, and acquiring a high score entails consistently managing your credit well. But even if you've made mistakes in the past and you're dealing with the consequences of poor credit choices, it's possible to fix your personal credit history.

Instructions

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Use online or Internet services to pay your bills. Avoid delinquencies by paying bills early using online bill-pay services. Sign up for free and pay credit card and loan statements upon arrival to fix your bad payment history and raise your credit score.

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Limit spending with credit cards. Pay down credit card balances by reducing spending and using this extra money to get rid of debt. Forward higher monthly payments to eliminate the debt sooner, and use cash in the meantime to avoid additional monthly charges.

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Approach old creditors to pay delinquent accounts or collection accounts. Purposely disregarding old accounts doesn't help your personal credit history. Settle old debts or make plans to pay them off.

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Confront creditors and request that they correct mistakes on your credit report. Attain a copy of your report from Annual Credit Report and analyze the report for mistakes that can lower your credit rating. Call creditors to bring attention to their mistakes and request an immediate update.

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Can Reducing Medical Debt Help Your FICO Score?

A FICO score is a reflection of what's in your credit report. FICO scores can be adversely impacted by judgments, late payments on credit cards and outstanding medical bills. If you are looking to find a way to increase your FICO score, paying off your medical bills could be one way to do it.

FICO Score Definition

A FICO score isn't just one score: it's usually a combination of three scores from the three major credit bureaus: Experian, TransUnion and Equifax. Your FICO score is the score that most lenders look at when determining whether to extend credit to you or not. They also use the score to calculate your interest rate should you be approved for credit. Your FICO score is a snapshot of what is in your credit file and can range from a low of 300 to a high of 800.

How Medical Bills Affect your Credit

It's not uncommon for medical bills to run into hundreds of thousands of dollars. Unfortunately for the consumer, it can often be impossible to come up with a reasonable payment plan to reduce the debt. What often happens is that the bill is turned over to a collection agency; this puts a black mark on your credit report. Even if you subsequently pay the bill, a medical bill can remain on your report for up to 7 years.

How Medical Bills Affect Your FICO Score

In most cases, although medical bills can have overall adverse consequences on your credit profile, they may not directly affect your FICO score. One of the major factors in the FICO score calculation is your revolving-credit utilization ratio and outstanding medical bills are not factored into that ratio. However, another factor in the FICO score is how many accounts you have in collection and your history of late payments. Unpaid medical bills could adversely affect that portion of your score.

Medical Bills on Your Credit Report

If you have unpaid medical bills on your credit report, it's possible that paying them off could increase your FICO score by a small amount. If you pay your bill in full, your payment will be reflected on your credit report but the collections notice will remain on the account for 7 years. If you want the item removed, you could dispute the hospital bill as a clerical error or you could dispute the charge with the credit reporting agency. If the charge is legitimate, you may not be able to get it removed from your report.

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How Do Inquiries Affect Your Credit Score?

Hard Inquiries vs. Soft Inquiries

Inquiries affect your credit score only if they come in as a "hard inquiry." A "hard inquiry" is when a creditor pulls your credit report to verify credit information, often for loan approval, financing approval or credit card approval. A hard inquiry will show all information on your credit report to the creditor. A creditor must have your permission to do a hard inquiry. A "soft inquiry" is done for promotional purposes--usually by credit card companies wanting to verify identity to send you unsolicited applications, or insurance companies hoping to cold call you for business. This type of inquiry does not show all information on your credit report, only identification information. Your permission is not needed for this type of credit inquiry.

Credit Score Impact

Your credit score will be affected by hard inquiries, but many factors are considered. Multiple inquiries from the same type of creditor will not have negative affects if made within a short time frame, typically 14 days, depending on the type of credit being pursued. Mortgages can be shopped for within a 30-day period before having a negative affect on your credit score. The theory is that you shouldn't be punished for shopping around for the best interest rates available, but it is a "red flag" if it looks as though you are trying to obtain a large amount of credit in a short time.

Reducing Inquiries

Aside from not pursuing any new credit, the only way to reduce the number of existing inquiries is to wait the two years for them to fall off your credit report. Keep a watch on your credit by checking every month to see if the inquiries are falling off like they should be. You can simply pull your credit report from each bureau every month, or you can sign up for a monitoring alert program. There is typically a small fee associated with these services. This is a good practice if you are trying to build up your credit, and also to watch out for any fraudulent activity.

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How to Repair a Bad Credit Score Quickly

Having a bad credit score can make it very difficult to get a loan or credit card. A bad credit score can also dramatically increase the interest rates that you have to pay on your credit obligations. Fortunately, there are ways to repair your credit score quickly. Contrary to what many people believe, you don't have to pay anyone to repair your credit score. You can do the entire job by yourself. Once your credit score has increased, it will be easier to get a loan such as a mortgage, auto loan or personal loan with a lower interest rate.

Instructions

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Request a copy of your credit report from AnnualCreditReport.com. On this website, you can get a free copy of your credit report from each of the three major credit reporting bureaus, Equifax, Experian and TransUnion, each year. Be sure to request your credit report from all three bureaus. Examine the credit reports for false information and out of date information that may be exacerbating your bad credit score.

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Contact each of the three major credit reporting bureaus in writing to dispute the incorrect or outdated information on your credit report. Include a copy of your credit report with the errors circled in red. Also include any documents you may have to support your dispute, such as credit card statements and other account statements which clearly show your balance. Scan and print or photocopy all these documents after you've signed or marked them and store them in a safe place. You can also save files of scanned letters and credit documents on a CD or DVD for safe keeping. If you don't receive a response from the credit bureaus within a month, call them or write to them again.

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Find out your credit score from Equifax, Experian or TransUnion. Your credit score is also available from the three major credit reporting bureaus on the AnnualCreditReport.com website. However, keep in mind that you will have to pay for this service.

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Make a commitment to pay all of your bills on time from now on. Make a budget which includes all your monthly income and expenses. Eliminate any unnecessary expenses such as eating out, going to movies and shopping for items you don't need. You may also want to consider cancelling cell phone and satellite or cable television contracts to reduce your expenses.

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Start working to reduce your debt. Your credit score is partly determined by the amount that you've borrowed on credit in proportion to your credit limits. So if you have borrowed 50% of your credit limit on your credit cards, you will have a lower score than if you'd only borrowed 15% of your credit limit. If you're near or over your limit on a credit card, pay that one down first. Paying off credit cards entirely can also help to repair a bad credit score quickly. However, do not close the credit card accounts, as this will have a negative effect on your credit score.

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