Credit RepairPosted on September 4th, 2010 William No comments
Before you read this article, let me give you the bad news: there's no secret way to magically repair bad credit. If you've screwed up your credit rating, it's going to be bad for a while no matter what you do; anyone who tells you otherwise is just trying to get your money. Anyone who tells you that a specific law firm or credit repair company can magically fix your credit is scamming you for a commission.
That said, there are a number of ways that you can help your credit score to improve faster, and if the bad credit isn't your fault, it's quite possible that you might be able to see some quick improvement. Additionally, don't take the previous paragraph as meaning that offers to improve your credit score are all scams; some of them do, in fact, help you out. However, you can do the same things they do yourself for much cheaper; read on to find out how.
The first thing to do is order copies of your credit report from all three credit bureaus; remember that you're entitled to a free credit report from each one every year. Read through each report carefully, looking for any incorrect negative information; if you find any, having it removed is the easiest way to boost your credit store.
If you find any errors, look up the contact information for the credit bureau and send them a short letter informing them of the error. Don't bother quoting laws, court rulings, etc - they know those better than you do. All you need to do is provide two pieces of identification and tell them that an error exists. Start with your full contact information, social security number, and date of birth, then list each of the errors and request that they be corrected.
Tip: You don't have to tell them why an item is incorrect, only that it is. If you failed to pay a loan of $500, but your credit report shows it as $1200, don't tell them that you only owe $500, just say that the item is incorrect; the credit bureau will then contact the lender. If the lender tells them that $500 is the correct amount, your report will be corrected; however, if the lender fails to respond, that item will simply be removed entirely!
Now that you've removed incorrect information, it's time to start taking care of everything else. If you have bills that are past due, you want to start by paying the newer ones. Why? Newer information has a much higher impact on your credit score than older information does. A recently missed bill is strongly affecting your credit score, so you want to get it taken care of right away; ironically, paying an older bill that's close to dropping off your credit report can actually damage your credit rating, as it reactivates that account, making it more important. When paying older charged-off accounts that are close to dropping off (which happens after seven years), it actually makes sense to wait until they disappear from your report to avoid lowering your credit score. So: start by paying down recent debt! Also, open accounts count for more than charged-off accounts, so do them first as well.
Another thing to be careful of is that you only pay the original creditor, not the debt collector; when you pay the debt collector, it's more difficult to prove that you actually did pay the bill, which can come back to bite you later.
If you're not able to pay all of your debts right now, make contact with your creditors and ask if they'll take smaller payments; most will prefer receiving something over nothing! Even if they say no, you can try sending in a check for less than the required minimum payment; it's unlikely that they won't cash it. In that case, at least your credit report should show that you're making payments on your debt.
If you have enough money to make all of your minimum payments with some left over, what will help is to get the average utilization down. In other words, try not to be too close to your limit on any one card. That said, unless you need your score to go up quickly, paying down the debt with the highest interest rate will save you more money in the long run. Whatever you do, once you get your credit cards paid off, do not close the accounts; keeping them open decreases your credit utilization (what percentage of your available credit you're using), which improves your credit scores. However, you also want to avoid applying for new credit, as "hard" inquiries, which occur when you apply for credit and they check your credit report, can lower your score.
Again, there's no magic bullet to improve your credit rating, just time and being responsible...but you can speed it up by being an informed customer and handling credit properly. Good luck!