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How to Repair Your Credit in 5 Easy Steps

How to Repair Your Credit in 5 Easy Steps

Abad credit score can cost you in a wide variety of ways. It can drive up the interest rate on the loans you try to take, and it can prevent you from being approved for new lines of credit. You might be turned down for a job or apartment. Or you may be charged a higher deposit for an apartment or utilities. However, you don't have to just live with it.

Credit repair is a real thing, and there are tons of things you can do to significantly improve your credit. Here's how to repair your credit in five easy steps.

How to Repair Your Credit Score

Minimize the Damage

When you find yourself in a hole, the first thing to do is stop digging. When your credit is a mess, prevent it from getting worse. 

If you've gone through a divorce, close all joint accounts so that your now ex-partner can't make things worse by racking up more debt you're liable for. Pull your credit report and ensure that their debts aren't incorrectly listed on your account. Get control of your finances and ensure that you never make another late payment. If you're in bankruptcy and making payments to your creditors, ensure that you make all payments in full so that your credit report doesn't take another hit.

  •  Check Your Credit Report Regularly

Check your credit report regularly. If you want to get a copy of your credit report, all you have to do is to apply for your free copy. You are entitled to one free copy per year of your credit report from all three major credit bureaus.

If you see an account you forgot about, pay it off or clean it up but don't let unpaid balances you forgot about go into collections. Remove incorrect information. If a debt has gone into collections, verify that the new creditor isn't listing the debt in addition to the original creditor. That hurts your debt to income score. Know that you can also strike a deal with creditors. But some creditors are more forgiving than others and more willing to settle. 

MediCredit Inc., for instance, is mainly involved with medical bills and might be more lenient than other agencies. If you have an old medical bill you forgot about, you might have to deal with them. You should, however, verify that they have the right to collect the debt by sending a debt validation letter first. If they don't respond, you can challenge the debt with credit reporting agencies and get it removed from the report. You might get lucky and get the debt thrown out because of a technicality. 

But if they do prove it, the other option could be to strike a pay for delete agreement with them stating that they'll remove negative entries from your credit report in exchange for a partial or total payment. Whatever you do, try to offer a low amount at first and negotiate. And make sure that everything is written down on paper in case they don't honor their part of the deal.

Manage Your Payment History

We've already mentioned the need to get on top of your bills. If possible, charge something on the credit card and immediately pay it off to create a clean payment history. If you can't pay off your bills, ensure that you make at least the minimum monthly payment on your credit accounts. 

Furthermore, you could open up a savings account and secured credit card to begin rebuilding your credit. Eventually, they'll return your deposit, leaving you with a credit card. Becoming an authorized user on someone else's credit card could help you, too.

Also, pay attention to bills that may pop up and go into collections if you don't take care of them. For example, once you start paying your student loans, you're obligated to keep making payments. Missed payments will ding your credit score.

Reduce Your Credit Utilization

Your credit score is based in large part on the debt load you carry relative to your income. Reduce your credit utilization by no longer buying things on credit and paying down the debt. Once you've gotten control of your debt, don't let your credit utilization exceed 10 percent of the credit line.

Clean Up Your Act

Get in the habit of paying cash or with debit cards instead of credit cards. Only carry two or three credit cards, and always think before you charge something. Shred credit applications you receive. Get counseling if necessary, to manage your spending or negotiate down debt. Don't fall back into a financial hole.

  •  Conclusion

Rebuilding your credit legitimately takes time, effort, and dedication to regain control of your money. However, you can rebuild it with the right knowledge and resources.

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