Bad credit is a particularly troublesome life problem that can haunt you for years. Your financial options will diminish, fewer options will be open to you and you will not be able to take advantage of new credit line offers. There are a few steps you can take to start repairing your credit now.
Secured Credit Card
If you need a credit card to aid in fixing your credit but you cannot obtain one due to the state of your credit, applying for a secured credit card is an option. These are extremely easy to qualify for. A secured credit card looks just like a regular card, and works like a regular card, but you have to have the necessary money in an account to guarantee payment. A new credit card, used responsibly, will help repair your credit rating.
Start by paying off credit cards with accounts 50% over your limit. You can concentrate on another card once these accounts are lowered to under half of your limit. When balances are over 50%, your credit rating goes down significantly, so try to either spread out your debt or, ideally, pay off your credit cards.
Any credit cards that have balances over 50% of your limit should be paid off until they are less than 50% of your limit. Carrying a balance of more than half your credit limit negatively impacts your credit score. Either pay this balance down or spread it out over multiple cards.
Good credit scores allow you to take out loans, buy a house, and make other large purchases. Fulfilling your mortgage obligation in a timely fashion does a great deal of good for your credit rating. Owning your own home also improves your credit score in the form of having large assets to borrow against. This will be very helpful if the time comes where you need to take out a loan.
When trying to rehabilitate your credit, it is important to work with each credit card company you are indebted to. This prevents you from sinking further into debt or further damaging your credit score. It is perfectly appropriate to call and request an adjustment to your interest rate or to push back a payment date if needed.
To avoid paying too much, you can refuse to pay off huge interest rates. It is bordering on illegal for credit card companies to charge you skyrocketed interest rates. However, you signed a contract agreeing to pay off interests. You may wish to make a legal claim that the interest rate charged exceeded your state’s statutory limits.
Start paying on bills to help your credit. You can’t just pay whatever you want whenever you want. You need to pay your entire balance when it’s due. Once you start paying your past bills off, you will notice an immediate improvement in your credit.
As you work toward repairing your credit score, you should be willing to cooperate and work with your creditors. Talking to them will help keep you from drowning further in debt and making your credit worse. You can even ask for help, such as pushing back the due date of your monthly payments or reducing the interest rate.
Find and challenge errors on your credit report using the dispute process offered by each credit reporting agency. Gather your support documents, make a list of the errors, and compose a letter to pertinent agencies. Make sure when you send the dispute package that you request proof by signature that it was received.
Always do research before contracting a credit counselor. Many counselors are on the up-and-up and are truly helpful. Others just want to take money from you. Other counselors are nothing more than scam artists. A savvy consumer will always do his or her research on any credit counseling service to ensure that the agency is legitimate.
If you are trying to improve your credit score but are having difficulty gaining access to new credit in order to do so, join a credit union. Credit unions can often offer better rates and more alternatives than larger banks, because they base their decisions on the local economy instead of the national situation.
Take the necessary steps to fix any mistakes that you see on your credit reports by filing an official dispute. Draft a dispute letter that will go to each credit rating agency that shows an error, and prepare any supporting documents. Make sure that you ask for a return receipt so that you know your letter makes it to its intended destination.
Always examine your monthly credit card bill to make sure everything is accurate. You must get in touch with your credit card issuer as soon as you spot an error to make sure that it is properly handled and does not result in any negative reporting.
Do not spend more than you can afford. You will have to change the way you think in order to do this correctly. In past years, people used good credit ratings to buy the items that they normally couldn’t afford, and they are now currently paying big payments. Take a hard honest look at your budget, and figure out what you can honestly afford to spend.
Examine your credit card charges monthly to ensure they are correct. You must get in touch with your credit card issuer as soon as you spot an error to make sure that it is properly handled and does not result in any negative reporting.
Pay off any balances as soon as you can. Always pay off the card with the highest interest rate first and then work you way down. This can prove to creditors that you are serious about paying down your debt.
Timely payments will keep your credit status in good standing. Each time you make your payment late it will go against you.
When you receive your credit card statement, go over it carefully. You should make sure that the charges that you get are right, and that you’re not paying for items you did not buy. You should ensure everything is okay and does not have any errors.
Lowering the balances on any currently revolving accounts will increase your credit score. Paying off your balances will have a perceptible positive impact on your credit score. When your available credit passes 20, 40, 60, 80 or 100 percent, it gets noticed by the FICO system.
Make sure that the credit repair agency you choose to work with is reputable. As with most industries nowadays, there are a number of shady companies offering credit repair. Some people have turned over all of their financial information to people who turned out to be scam artists, and they wound up in worse shape than before they started. See if the company in question has a reputation on any of the user review sites before you commence business with them.
Lenders are not likely to include the statement in their decision process. The most it will do is draw more attention to the bad aspects of the report.
Keep your credit cards in your wallet. Purchase with cash. If you absolutely need to use a credit card, be prepared to pay off the balance at the end of the month or as soon as possible.
A nasty credit crunch can generally be caused by lacking the funds to pay off multiple debts. Spread your payments to all of your different creditors. Even if you are only making minimum payments, sending along at least a little money will mollify your creditors and prevent them from contacting collection agencies.
Having to deal with debt collectors is often very stressful and distressing. Cease and desist documents can be used to hold back collection agencies, but only to stop harassment. You will still have to pay what you owe even if collection agencies stop calling you.
Repair your credit by building it up again. Using a prepaid credit card will help to build your credit score, without the worry of late payments, and bad marks on your credit report. Doing so indicates to the person lending that you are a responsible person.
Put these ideas to use so you can repair your credit and stay on top of good credit practices. Since having a solid credit rating is vital for various transactions, time spent learning how to repair your credit is not wasted.