Regularly Check Credit Reports for Errors
Every time you apply for credit and pay your installments, a note appears on your credit report.
If you’re late in paying or skip a payment, this will also appear on your record.
The same is true for Tax liens and bankruptcies in your name.
Sometimes, you may find that your credit record contains negative information that simply isn’t true.
That is why it’s absolutely essential to regularly check your credit report for errors.
If you do find errors in your credit report, and if you can prove it, you can contact the credit bureau and credit provider to have the error corrected.
Every American is entitled to a free annual credit report, and you should definitely make use of this right.
Visit www.annualcreditreport.com and follow the easy steps to receive yours.
Dispute Credit Report Errors
As you read through your credit report, you’ll want to make a note of any errors that you find.
These may include:
- Wrong personal information like your name and address
- Accounts or credit cards listed on your report that don’t belong to you
- Closed accounts still listed as open - and vice versa
- Late payments that you can prove were paid on time
- Errors in your credit account balances and credit limits
If you feel that any information on your credit report is inaccurate, your first step should be to contact the credit provider like your bank or credit card company.
Simply ask them to correct the error and update the credit bureau.
Should your credit provider fail to take action, or if your version of events differs from theirs, you can contact the credit bureau directly and lodge a dispute.
You can visit the credit bureaus’ websites for more information about the dispute process.
Explore Credit Repair Services
If the process of requesting credit reports and lodging disputes seems tedious or time-consuming, you can always let the experts repair your credit.
Credit repair companies will request your credit reports from the three main credit bureaus (TransUnion, Experian, and Equifax), check them for genuine errors and lodge disputes on your behalf.
You may need to pay the credit repair service monthly, or they may charge a flat fee.
The total cost could run between $50 and over $500, depending on the amount of work that’s required to repair your credit.
One important thing to note is that by law, credit repair services can’t charge you an upfront fee before they start to work on your credit issues.
They also can’t guarantee that your credit score will improve, and they can’t remove legitimate negative information from your credit report.
If a company claims to be able to do this, we recommend that you steer clear of it altogether.
Use Debt Cost Calculator To Evaluate Debts
Every dollar you owe your credit provider attracts interest and fees, and by the time you’ve repaid it you may have paid almost double the amount you borrowed to begin with.
Before you apply for a loan, or if you’re in the process of paying off your credit cards, you’ll want to use a debt cost calculator to find out how much you’ll end up paying overall.
It’s always a good idea to pay off your debts as quickly as possible - but make sure that your monthly installment is affordable.
You don’t want to risk paying late or defaulting because your credit score will suffer.
Use Cash To Open Secured Credit Cards
A credit card is a great way to rebuild your credit score - but it’s hard to get approved for one with bad credit.
If you have a few hundred dollars in cash, you can opt for a secured credit card and slowly repair your credit score by making your payments on time every month.
- A secured credit card requires a collateral deposit (with some cards starting from $100 or less). Your credit limit will typically be the same or less than this amount.
- You’ll need a FICO score of at least 500 to apply for most secured credit cards, and 600 or above is even better.
- Over time, as you make your credit card payments diligently, the credit card company will report this positive behavior to the three credit bureaus. This can help to increase your FICO score with responsible use.
- Eventually, some secured credit cards have an option whereby you may be able to transition to an unsecured card with a higher limit as time goes by.
Set Spending Alerts
One of the tricky things about using cashless payment methods is that it’s easy to spend a lot without realizing it.
If you’re spending on credit, the temptation to swipe that card is doubly tempting.
Since the money you spend on credit today might have to be repaid with interest if you can’t handle the amount during the grace period, it’s essential to track your spending and keep it under control.
Automatic spending alerts are a very useful tool that you can use to manage your credit card expenses.
You’ll receive a text message once you’ve spent a certain amount each month on your card.
By setting the alert amount to a figure you can afford to spend each month, you’ll avoid overspending and keep your debt repayments at a comfortable level.
Try Credit Counseling
If you find that your monthly credit card payments simply aren’t affordable, there are professional advisors who can help.
It’s essential to seek their advice before late payments and delinquencies affect your credit score negatively.
Credit counseling is an essential service that can help you manage your credit card debt and see your way clear to financial freedom.
Your credit counselor will work with you to draw up a monthly budget, assess your assets and debts, and negotiate with your credit card companies to help you get your debts paid off for good.
The NFCC’s network of credit counselors is a great place to start if you’re looking for a credible credit counseling agency that will put your best interests first.
Conclusion
A FICO score of 600 or more is essential when it comes to applying for credit - and by using the methods above, you can definitely increase your score over time.
Rebuilding your credit is a gradual process that takes time, patience, and commitment - but it’s certainly worthwhile.
By following the steps in this article and giving yourself several months to a year, you’ll start to see the positive effects that credit repair can have on your FICO score.
After making credit repair and maintenance a lifelong habit, you may even find yourself with the best credit score you’ve ever had.
