Credit repair is something that we must all face – especially when we are in debt. Regardless if you had been making your payments, the high debt amount that you have could still have a negative effect on 30% of your credit score. Checking the condition of your credit report after debt relief is a must – even if it is just to check if your debts have been updated and you are given a clean slate already.
While a bad credit will not kill you, it will make financial opportunities hard to come by. It is not impossible, for instance, to get a loan but you will have limited choices. Not only that, the lender who will give you a chance will impose high interest rates on the money you will borrow. It can even spell the difference between renting in a safe and secure neighborhood and a less than reputable one.
If you fear that your credit is in ruins and you want to repair that, you can do it on your own. You don’t have to spend anything on it – if there is, that will only be very minimal. You don’t have to hire someone to do it for you. By performing your own credit repair, you are actually practicing proper financial management skills – and that is always a winner.
What happens when you repair your credit
So what exactly happens when you repair your credit?
Step 1: Get a copy of your credit report. This is an obvious start. You need to know the extent of the damage that you have to work on. You can get a copy of your report from the Annual Credit Report website. The government mandated the three major credit bureaus to give you a free copy of your report once a year. This is the site where you can download your copy.
Step 2. Review the details on your credit report. When you have the copy in your hands, review all the details. Make sure the credit accounts listed under your name are all something that you made. Not only that, it has to be represented correctly.
Step 3. Dispute any errors. If you paid off your debts, it has to show in this report. If you find any error, take note of it and send a letter of dispute to the credit bureau that listed your report. The credit bureau will investigate the information you are disputing and when they find you to be correct, it will be revised. You should be able to get a free copy of the revised report.
Step 4. Take note of what you have to repair. After making sure that the information on your credit report is accurate, you can take note of what you need to repair. These can be past accounts and late payments that you have. It can also be any maxed credit limits.
Step 5. Pay down debts that were not solved by your debt relief program. In case there are debts that remain to be unsolved by your debt relief program, you need to concentrate on these. Assuming that you completed the program correctly, your debt amount should have gone down. Your efforts should not stop there and in fact, you should not stop paying your debts until all of them are completely paid off.
Step 6. Get a new credit and use/pay it properly. When you have the ball rolling on your remaining debts and all of them have a solid payment plan, it is time to try and open a new credit. Limit it and apply one at a time. In fact, it is suggested that you only open one. This is just to help reflect in your credit report that you are now more responsible in paying off your dues. If you do not qualify for a major credit card, even a merchant’s credit card is acceptable.
How to increase your credit score
We all know how bad credit scores can have a negative effect in your life. But the good news is, it can be repaired. However, do not expect that it will be an overnight fix. Raising your credit score will take time and you have to be consistent with your efforts. Once mistake and cause your score to decrease again.
Here are some tips to help improve your credit report and thus increase your credit score.
Pay your dues on time.
Get new credit once in awhile.
Keep your balance to credit limit below 35% of the latter.
Do not close accounts – especially old ones.
Try to space your disputes one at a time.
Educate yourself about what hurts your credit and what does not.
It helps if you keep on monitoring your credit report so you can dispute any error. Not only will you spot errors, you can also check if you had been a victim of identity theft. If you see a debt that is not yours, you need to report it immediately. You may be able to catch the culprit if you act quickly. If you get one report every four months from the AnnualCreditReport.com, you don’t have to spend on anything for this monitoring.