6 Ways To Fix Your Bad Credit
Your Credit Is Bad But You Can Fix It
So, you want to buy a house but your credit stinks? This is not the time to beat yourself up for screwing up your credit but it is the time to start fixing it. Most lenders will tell you that anything less than a “good” credit score will cause headaches in either qualifying for a loan or for securing a competitive interest rate. Follow these six easy do-it-yourself steps and your credit will improve. Let’s get started.
1. Where The
Heck Do You Stand?
Before you begin do-it-yourself credit
repair, you’ll want to get copies of your full credit reports from all three
bureaus (Experian, TransUnion, and Equifax).
You
can get your reports truly free, once a year, at www.annualcreditreport.com or
by calling 1-877-322-8228.
You
can also try free credit score tracking apps Credit Karma or Credit Sesame
to help you.
Credit scores range from 300 to 850. A score
of between 700 and 740, depending on the scoring method used, is
considered “good credit” and usually enough to qualify you for the best
credit cards and lowest mortgage rates.
2. If You Find Errors, Dispute Them
The next step in credit repair is to
dispute incorrect information on your credit report.
Errors aren’t common but they do happen.
Most of the time bad credit is your fault. Don’t try to argue accurate
information, but if you do see errors–no matter how small—it’s worth getting
rid of them up. Here’s how:
Once you have the copy of your full credit
report in hand, check your identity information (Social Security number,
spelling of your name and address), and credit history.
Review the list of credit cards,
outstanding debts, and major purchases. If you see any mistakes or questionable
items, make a copy of the report and highlight the error.
Next, gather any information that you have
to back you up, such as bank account statements, and make copies of these as
well. This is important! The credit bureaus won’t do anything without proof.
Write a letter to the specific credit
reporting agency that shows the falsehood, whether it is Experian, Equifax, or
TransUnion. Explain the mistake and include a copy of the highlighted report
along with your documentation. Although certain bureaus now let you submit
disputes online, it’s not a bad idea to send this letter by certified mail, and
keep a copy for yourself. The reporting agency has 30 days from the receipt of
your letter to respond. The Federal Trade Commission provides
advice on contacting the credit bureaus about discrepancies. Here are the
contact numbers and web sites for the three credit bureaus:
Experian: 1-888-397-3742
– www.experian.com
TransUnion: 1-800-916-8800 – www.transunion.com
Equifax: 800-685-1111
– www.equifax.com
3. Quit
Digging The Hole
There is an old saying that if you find
yourself in a hole, quit digging.
Once you deal with any errors on your
credit report, it’s time to ensure you’re not still spending more than you can
afford each month.
Why is this so important? It’s
because are only three simple things to do to repair bad credit:
Pay all of your bills on time.
Pay down debt (especially credit card debt).
Avoid applying for credit.
But before you can do these things, you need
to make sure you’re not spending more than you earn—you need a budget. Once
again, you need to quit digging. If you don’t know how to put together a
budget, Google it. But don’t make the same mistake of spending more than can
afford.
4. Pay Your Bills On-Time. PERIOD!
If you want to fix bad credit, you need to
start paying all of your monthly bills on time, plain and simple.
If you’re behind on any bill, get caught up
as soon as you can. On-time payments are the single most important factor to
your credit score. Simply put, your credit won’t improve until you can
consistently pay every bill on time. If you need a remind for each of your
bills, simply enter re-occurring reminders on your smart phone for when you
need to get each bill paid. No matter what system you use to timely pay your
bill just get it done.
5. Pay Down Your Credit Card Balances
Take charge of your credit cards by paying
down their balances.
If you have any outstanding balances, make
room in your budget to pay down these debts bit by bit, every month until they
are gone.
Know your credit limits and make every effort
to stay well under the maximum when charging items.
6. No New Credit
Finally, resist the temptation to open a
new credit card, even when a store offers a discount on your purchase for doing
so.
Each time you apply for credit is listed on
your credit report as a “hard inquiry” and if you have too many within two
years, your credit score will suffer. Basically, a consumer with good credit
can apply for credit a few times each year before it begins to affect their
credit score. If you’re already starting with below-average credit, however,
these inquiries may have more of an impact on your score and delay your
ultimate goal of watching your credit score climb.
The
bottom line is this will take some time and effort on your part. The
improvement might come in a few months or it could take a couple of years. But
with better a better credit score comes the freedom to buy that new home you
badly want. Keep your eye on the prize. You can do this.
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| Debt Free Will Feel So Good! |
Scott's Advice
Your bad credit choices of the past do not need to keep you down forever. You can do something right now and you should. Making good choices today are seldom easy (I struggle with that every time a see an Old Fashion donut) but you can start with a first step. Call me. I'll give you some inspiration and we can talk about that donut I didn't eat.
Scott C. Dickinson is a real estate broker who lives in beautiful Vancouver, WA but helps others with their real estate needs all over the US. He can be reached by email at ScottYourBroker@gmail.com or call him at 360-518-7197.
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