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A poor credit standing can be one of the worst things that can happen to you. But it’s not the end of the world. A determined effort to improve your credit report can get you started on the right path. It won't happen overnight, but here are a few things you can do. Obtain credit reports Know what the three credit bureaus (TransUnion, Equifax, and Experian) say about you. Visit credit report agencies and check your standing. Credit reporting is voluntarily made by banks to any of these bureaus and most large banks do submit to all three when they do. Get a credit report from all three at least twice in a year. If you've been denied insurance, credit cards, mortgages, or employment due to a bad credit report, you can obtain a free copy of the report from the bureau that the lending, insurance or company consulted to deny you. The company you applied with is obliged to provide you with the credit bureau names and contact information and you have 60 days to obtain the report. Study and check your reports carefully Almost a third of credit reports have data errors that can result in credit card or loan application denials. Credit bureaus seldom if ever verify the data they receive from banks. It is your responsibility to keep your credit record updated. Once you get all three reports, study them and note all typing errors and wrong information. If the adverse information is accurate, only time and improved finance management habits can change that for the better. Delinquent accounts remain on that report for seven years and bankruptcies for 10 years. Most creditors, however, consider payment behavior instead of one-time delinquency, so consistent on-time bill payments can and do improve your credit standing. Dispute errors Once an error is noted, you can either fill-out the dispute form that comes with your credit report or better write a letter. Identify each mistake and explain the error. Attach a copy of the report with the mistakes encircled. Have copies of all the documents and correspondences with credit bureaus. The credit bureau will investigate pertinent disputes within 30 days of receipt of your letter. Items not verified as correct are removed. Once a negative item is removed, the credit bureau cannot put it back unless a creditor verifies its accuracy. Liquidate your debt Devise a plan to reduce your debt while allowing you to pay on time consistently. Negotiate for better repayment terms to keep accounts current and not fall into charge-off status. Slowly retire unneeded credit card accounts. But don’t close a credit account as that will negatively affect your credit standing. Keep in mind to maintain your revolving credit debt to around 10 percent of your credit limit. But always pay in full as this will keep you from paying interest charges Update credit file Some creditors (local banks, credit unions, card companies) may not update your credit history to the bureaus. Do try to ask your bank creditors to report your better account information and payment history to a credit bureau. This is not a requirement for them to comply but ensure that before opening a new account. Ask if your on-time payments will be reported monthly. If they don’t, then go to another bank that will. If you have bad credit or even filed for Chapter 11 bankruptcy, don't allow your credit status to remain dormant. The faster you rebuild good credit by paying consistently on time, the faster you can amend and enhance your credit standing. But be sure they get reported. A secured credit card offers those with poor credit history a chance to rebuild their credit standing. Look around for the best deals but restrict your applications to just a few as credit appraising models look at the number of new accounts opened as well as inquiries for new accounts. A sudden rush of inquiries can yield a lower credit score.
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