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    Do Not Make These Credit Repair Mistakes

    Lyn Ridley
    Lyn Ridley - 2020-02-22T22:00:00.000Z

    Credit repair is essential for anyone who needs to boost their FICO score and gain access to a mortgage, loan, or credit card - but it’s important to do it the right way.

    • There are many strategies and tactics promoted by brokers, advisors, and online credit experts - and knowing which ones to use can be confusing. 
    • While some approaches have a proven track record there are others that produce poor results or may even cause your score to drop. 

    Keep reading to take a closer look at some of the less effective credit repair methods.

    Here are a few that we feel you should look out for and avoid altogether. 

    Not Checking Your Credit Report

    Your credit report will tell you exactly what kind of shape your FICO score is in - and yet many people don’t check theirs on a regular basis. 

    • Every consumer is entitled to a free annual credit report from each of the three main credit bureaus - Experian, TransUnion and Equifax. 
    • With the Covid-19 crisis these companies are offering free weekly credit reports until April 2021. 
    • Checking your report will let you identify negative marks that creditors may have reported and contest these if they are incorrect. 
    • You’ll also see the true state of your credit and this may inspire you to pay down your debts. 

    Don’t skip the first and most important step on the road to credit repair - it’s free, simple, and easy to access your credit history.

    Cancelling Your Cards

    If you’ve had a bad experience with credit card debt you may be tempted to cut up your cards and never use them again.

    This strategy may not be wise. 

    • Your credit score is calculated according to several factors - and credit history counts a full 10%. 
    • The longer your credit accounts stay open, the better - as long as you pay them regularly. 
    • If you feel tempted to spend money on your cards, give them to a trusted friend or relative for safekeeping. 
    • Keeping your credit accounts open will also give you access to emergency funds. 

    Keeping your credit accounts open and active will help boost your score.

    You can maintain a zero balance and keep your full credit limit available - just in case you need it. 

    Skipping Payments

    Every time you miss a payment your credit score starts to suffer.

    This is especially true if you skip several installments or default on your debt altogether. 

    • Prioritizing payments is not the same as skipping them. You’ll want to keep all your accounts in good standing if possible.
    • If you must skip a payment (because you simply can’t afford to make it) try to keep all your current debts paid up to date. 
    • You may have to skip payments on debts that have been charged off or are in collection. 

    If you’re having trouble making payments each month you may want to speak with a credit counselor and assess your options. 

    Transferring Balances

    Balance transfer credit cards are a useful way to consolidate your debt - especially if they come with competitive APRs and an interest-free introductory period. 

    Unfortunately many consumers don’t take advantage of the interest free period to pay down their debts - and often end up in more debt than ever. 

    • Don’t transfer balances just because you can’t afford to make a payment. You’ll just end up not being able to make the next payment. 
    • Effective budgeting is a better solution than most balance transfers. 
    • By cutting expenses and increasing your income you’ll have more cash available to pay your instalments. 

    A balance transfer should only be undertaken after careful consideration - it’s far better to budget well and pay down your existing debts. 

    Filing Bankruptcy 

    Bankruptcy is not a solution for bad credit - in fact it’s a leading cause of low credit scores and should only be used as a last resort.

    • Bankruptcies can knock hundreds of points off your credit score - and they stay on your credit history for between seven and ten years. 
    • Filing for bankruptcy could cause you to lose many of your assets and prized possessions - and with a low FICO score you won’t have access to affordable credit either. 

    Before you consider bankruptcy you’ll want to explore all other options including bad credit loans, consolidation loans and financial counseling. 

    Conclusion 

    Repairing your credit is essential if you're looking to boost your FICO score - and knowing how not to do it will help you avoid unhelpful strategies. 

    Not checking your credit score, cancelling your credit cards - and not paying them, doing hasty balance transfers and declaring bankruptcy without a very good reason are all strategies to avoid.