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5 Tips for Repairing Poor Credit

Posted on June 24, 2010

Clear debt, repair your creditIt is human to make a mistake but if your mistake was not paying your credit card bills on time or defaulting on a loan, the mistake can follow you around for another decade or longer. Having poor credit scores is limiting to your financial abilities. You will not be approved for new lines of credit and you may even find you are paying higher premiums for your car insurance.

Poor credit scores are not the end of the world. You can take action to improve your credit scores on your own. It will not happen overnight but with time and effort you can get results. Here are five tips to help you improve your credit scores and open the door for a better financial future:

Pay On-Time, Every Time

While no one is completely sure of the mathematical equation used to calculate credit scores, it is certain that the way you pay your bills has a big impact on your credit score. If you are 30, 60, 90 days or more late with payments on bills that report back to the credit bureaus, you will see a drop in your credit scores. If you are consistently late, you risk having accounts closed and the negative information being reported on your credit reports for years to come. It is never too late to start getting on track. Automate your payments to make it less likely you will be late or miss making payments. Over a six month time period of perfect bill-paying, you can see an increase in your credit score.

Stop Spending

If you want to improve your credit score and history, stop overspending on credit. If you max out your credit cards or take them over the credit limit, it will drop your score. By rights, you should never charge something you can’t afford to pay in cash but obviously this is not always the case. To help improve your credit, use your cards for purchases you are sure you can pay off in full each month. Paying the full balance will boost your score and keep your credit positive. Don’t spend more than you have on credit and keep a personal budget to make it easier to pay cash for things you need.

Order and Review Your Credit Report

You may have idea what your credit report contains but ideas in this case do not count for much. You need to order copies of all three of your credit histories from the major reporting bureaus Equifax, Experian, and TransUnion. Every individual has the right to receive one free copy of each annually. You can also get a free report for up to 60 days if you have been denied credit. These reports do not include your credit score (you must pay an extra fee to include the score) but they probably contain a handful of mistakes and incorrect information that negatively affects your credit score.

When you receive each report, go over every single line of information and check for accuracy. Any information that is not correct should be reported back to the credit bureau using the online or printed forms provided. The bureaus are required to investigate all reported inaccuracies and if the creditor does not cooperate, the information may be dropped from your report. Since you can get an annual report for free, consumers should make a habit of checking their reports at least once a year. You might be surprised to learn how a small mistake can cost you big time credit score points.

Negotiate With Creditors

If you are working on settling outstanding debts, know that you can do it on your own with the assistance of a high-priced credit repair agency. Contact your creditors directly to negotiate the debt owed and how the results will be reported to the credit bureau. In most cases, creditors want to get their money so they are willing to work with you. If you ignore creditors, you likely will not get much cooperation. When you negotiate your repayment schedule or a total payoff of the debt, also request that the creditor report back to the credit reporting bureaus that the account is in good standing and paid in full. Not everyone will be willing but you will never know if you don’t ask.

Don’t Repeat History

Again, repairing your credit will not happen overnight. It is an on-going process that takes time and patience. The most important lesson is that all consumers learn from their past mistakes and avoid repeating history time and again. Once you begin to notice an increase in your credit scores, keep doing what you are doing in handling your personal financial matters. By staying on task to getting out of debt and improving your credit score, you will reduce the risk of having to rebuild bad credit down the road. Having good credit will afford you the best deals, the best interest rates, and financial stability now and in your future.

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