Having good credit can be an essential in your life. We all must have good credit in order to qualify for home mortgages, car loans and even credit cards. However, many of us have struggled through difficult financial times from job layoffs, business failures or just the result of the economic recession. Many of us have bad credit but there are some steps we can take to begin to repair our credit and restore some semblance of stability to our financial lives today.
As you begin to repair your credit the first step you need to take is to get a credit report from each of the three major credit reporting agencies, TransUnion, Equifax and Experian. You are entitled to a free report from each of them one time per year or you can pay a fee and get a tri-merged report also. You may find that it is easier to assess the information if it is all contained on one report.
When you have your reports you will need to inspect them thoroughly for erroneous information or inaccuracies. It is believed that as many as 70% of all reports contain mistakes so it is to your advantage to find them so that you can take care of them immediately. There will also likely be some outdated or older accounts that have passed the statute of limitations in your state. You may be able to get those removed on that basis alone.
Another consideration is that your report is showing your highest credit limits. Many creditors fail to report the highest limits or they under-report them. A large part of your credit score is based upon the amount of your debt compared to your available credit line. If possible try to pay down your accounts to below 20% of the available credit. A quick trick to raise your credit score is to get a creditor to increase your credit limits.
Check also for any duplicate accounts. Even if the accounts are reporting positive information it is damaging to your credit score because it shows more outstanding debt than you really have. People with the highest credit scores have the most available credit and the least amount of debt.
All credit reporting is based upon the date of the last activity on the account. Therefore it is important to evaluate if it will be beneficial before you pay off an old collection account or especially a charge-off. When you pay it off it brings forward all of the negative information and makes it current, so it may be less damaging to leave it alone. Collections are often passed from company to company and while they should report when they no longer own the account many times they do not, so make sure that what is showing on your report is not a duplicate and that it is completely valid.
All unknown credit should be disputed. Many people end up with other people?s credit information on their account. This often happens when there is a common shared name like Smith or Jones but it can happen to anyone when SSN?s get transposed. Just verify that all of the accounts on your report belong only to you and that they are an accurate representation of your own records.
You can also begin to build new credit. Getting a new credit card is the best way to do this. If you are unable to qualify for a regular credit card yet, you can start with a prepaid card. The worst thing to do is to go out and get credit cards for department stores, furniture stores and the like because that type of credit is counted negatively against you when it comes to credit scoring.
While there are many things that you can do on your own to repair your credit you may find that it is helpful to hire a professional credit repair company to assist you. The reputable credit repair companies have the expertise to help you through the tricky parts of credit repair. You may be able to achieve your credit repair more efficiently with a professional so it is definitely something to consider.
