The First Step
The first step in repairing your credit it to know that what’s on your credit report is accurate. Each year you can request a free credit report from AnnualCreditReport.com. Beware of other companies pitching a free report because if you have to fork over your credit card number than it isn’t free. Take a good look at your credit report when it arrives to ensure that the information about you is true. Check for identity theft (accounts open in your name but not by you). Also check for late payment information reported, if you can prove that you paid on time you can have this information corrected. If you do find information that is incorrect, write to the reporting agency, Equifax, Trans Union, or Experian with a copy of proof. It is a good idea to send a copy of your report with the information highlighted in red or yellow. The credit-reporting agency has 30 days to investigate and you should hear back in a couple of weeks. However, be proactive. If you haven’t heard anything in about three weeks call them.
Learning New Habits
Now that your report is accurate, it is time to bring your accounts current. A good place to learn how to repair your credit and to increase your credit score is from the source itself—FICO. Lenders use some variation of the FICO model to determine your credit worthiness so it just makes sense to follow the advice from Myfico.com to get started on the right place to good credit. MyFico.com suggests the following steps to repair your credit:
- Pay your bills on time—this might seem obvious but there is a good reason you should do this besides it is just morally right. How you pay your bills weighs about 35% on your FICO score. That’s right, if you pay your bills on time, you have at least a third of the score beat.
- How much debt you owe is the next biggest chuck of your score and that is 30%. Even though you are paying your bills on time, if your credit cards are to their limit lenders may look at this as a potential hazard. Pay those cards down as soon as humanly possible. One trick that might make an impact on your credit score is to have lenders increase your credit limit. This is not so you can spend more, it looks better because you are not at the max of your credit limit.
- Don’t chase those lower credit cards. Opening new accounts and closing older ones can hurt your score even though you may be getting a better interest rate. A secured card is also a good idea when repairing credit or starting credit. Your credit limit is based on how much you have in a savings account with the lending bank or company. As you make your payments on time every month, it is reported to the credit bureaus, which helps to rebuild your credit score.
As you can see, it takes time and effort on your part to repair your credit. There is really no need to pay someone else to do what ultimately is up to you to do. The information is out there and it doesn’t always cost to get it. If you are purchasing a course or an eBook on how to repair credit, know that you are paying someone for taking the time to do the research that you can do yourself. However, there are those companies that will call your creditors on your behalf for a fee. You can do this too. Whichever paths you decide to take make sure to do your homework before issuing your credit card number. Check reviews of that course or eBook. Contact the BBB to see what complaints have been filed, if any. Then, take the steps to repair your credit and avoid those companies promising overnight success.