If you have bad credit and mounting debt, it can seem hopeless, but there are things you can do step by step to fix the issue. Especially in the coming months with changes to the FICO scoring system. Now more than ever repairing your credit is easier than ever. We sat down with Kyle Burton who covers consumer financial loans for installment loans network, a network of online loan offers for borrowers with average to excellent credit to get some tips towards repairing credit and improving your chances for qualifying for a loan from the lenders perspective. There are steps you can take right now to begin the road to repairing your blemished credit history.
The first step is to pull your credit reports. When you pull your own credit report it does not contrary to popular belief damage your credit. When you pull your own credit it does not count as a hard inquiry, but a soft inquiry seen only by you. Creditors will not even see that you pulled your own credit report. Pulling your current credit report will let you know exactly what you need to work on to fix your credit. Every debt that is outstanding that creditors bothered to report will be listed between one, two or all three credit reports. You can obtain free copies of your credit reports from all three major credit bureaus which are Equifax, Experian, and TransUnion, at AnnualCreditReport.com. The credit reports are free thanks to the Fair and Accurate Credit Transactions Act (FACTA), and pulling your credit report from this website does not require you to enter any banking or credit card info.
After you have pulled your credit reports, make sure that the reports do not include any errors what so ever. Even an error in address can effect you. If for example a creditor has reported you as being late on a payment and you were not late you can dispute this with both the credit bureau in writing and the creditor. An inaccurately reported late payment for example can lower your score by up to 100 points. If you have a negative account and it is older than seven years you can have the negative removed from your credit reports. You can also dispute anything that you feel cannot be verified. Also you can dispute any inaccurate, incomplete, or out of date information appearing on your reports. A very common error found on credit reports is inaccurate credit limits and account balances, these should also be disputed as they to can effect your score. You can dispute by mail or for faster result directly at the credit reporting agencies website. Credit bureaus by law have only 30 days to investigate and respond to your dispute, though they can get a 15 day extension should you be required to send in additional proof while they investigate your claims. When you do dispute, do include all relevant information about your claims, as failure to do so can cause a delay.
Credit Bureaus Dispute Addresses:
P.O. Box 7404256
Atlanta, GA 30374-0256
P.O. Box 9701
Allen, TX 75013
P.O. Box 2000
Chester, PA 19022-2000
If you are in debt and your debt to income ration is what has done in your credit, avoid new purchases on your credit cards. Using up more than 30% of your available credit results in a loss of points on your credit score. Your use of available credit is your credit utilization, and this has a huge impact on your score. This affects both your Fico Score and your Vantagescore, which is another type of credit scoring used widely. The best way to not take a credit score hit is to keep your credit utilization low. Credit utilization is counted per account and also all accounted added together overall. Once your reduce your credit balances and keep them down, your credit score will go up substantially. Many people are unaware that even if you pay the balance off every month, simply using more than 30% of your available credit can and does lower your score temporarily.
If you are behind on your payments these need to be caught up as soon as possible. Payment history accounts for 35% of your current credit score. The farther behind you get on payments, the more your credit score starts to suffer. If your account gets sent to a collection agency or charged off your score takes a dive, so make sure to prevent any current accounts from entering into collections status. You can contact your creditor to work out payment arrangements, and some credits will re-age your account on request to show you as current, creditors are often willing to do this is you can pay the balance off in full, especially if you have never been late with a payment before hand. The term is called negotiating a pay for delete. As a last resort if you are way behind on payments you can always try and settle the account or less than what is owed. With the changes in the FICO scoring coming this fall, settlements will not hurt your credit as much as it used to. If you do settle the account be aware the term “Settled” by be notated on the account.
While you are repairing damaged credit, limit any new credit applications. 10% of your score is composed of the number of inquiries on your credit report. Inquiries happen every time a credit pulls your credit report, and trying to open a new account will always result in an inquiry. If you view your credit report and see inquiries that were not the result of you applying for credit do not worry these are often from other creditors do a pre screening for pre-approved credit card offers. You only suffer hard inquiries that effect your score when you apply for any type of credit.
You may be tempted to close some accounts out while repairing your credit, but this most often times has no positive effect on your credit, in fact it often has the reverse. You need at least 3 open credit sources listed on your file to avoid falling into the thin credit category, which would result in you no longer having any credit score, which is far worse than having a poor score.
Last but not least if credit card debt is the majority of your debt, and if your score is still at least 620, you can try to apply for a credit card with a balance transfer. This works better when your score is higher, as you get better rates and offers. Many cards offer a year with no interest on balance transfers.