Monday, January 28, 2013

A Quick Guide to Credit Repair

If you have a credit score at room temperature, good credit may seem like an impossibility. However, repairing your credit is especially important if you are looking to buy a home. Hopefully, the era of predatory lending is over but unfortunately the recent housing collapse has forced lenders to tighten the reins in terms of who they approve for mortgages. By improving your credit score, you will be more likely to qualify for a mortgage and benefit from the lowest interest rates available.

Simple Steps to Repairing Your Credit
  1. Print a report. Remove your hands from in front of your eyes, take a deep breath, and print a FREE copy of your credit report. Then get in the habit of viewing your report every four months to make sure it is accurate. Each of the three major credit bureaus is required to provide you with one free report per year:
    If you see anything that is inaccurate, you can proceed via the credit bureau's instructions to report it and begin working to remove it. Also, remember that credit bureaus are not the enemy. They are simply the middleperson. They know nothing about your accounts or history, only what is reported to them by various creditors.
  2. Payment Plans. Did you know payment history is the number one contributing factor to your overall credit score? You may be surprised how willing creditors are when it comes to working out a payment plan. Rather than missing payments, which will constantly ding your credit report, try to work with all of your creditors to arrange payments you can afford on time.
  3. Automatic Debits.  If you usually have the money but often forget to make them, start going online to set up automatic debits. You can log in to the creditor's website and add your checking account or you can use online banking to set up recurring payments. Either way, this can help to get you back on track and make sure your payments are made consistently from here on out.
  4. Secured Credit Card. No credit can be as equally detrimental as bad credit in the eyes of prospective lenders. Or, if your debt was so heinous you cut up all your cards in a fit of frustration, it's time to obtain a secured credit card. Ask your bank if they offer one. These cards require a "deposit" which is used as your credit line for a certain term. Once you have established a regular payment routine, the bank will refund your deposit amount and begin to increase your credit line, which then boosts your credit score. You are often able to "upgrade" to an unsecured card at this point.
  5. Don't cancel old cards. If you haven't canceled your old cards, that's a good thing. Length of credit history is important. If you want to eliminate cards, cancel new cards and keep the old ones active as you pay them down.
Repairing your credit is definitely a one-step-at-a-time process, but once you have good credit again, your diligent efforts will be worth it.


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