If you’d like to patch up spotty credit history and rebuild your credit score, here are some do-it-yourself credit repair tips to get you started.
Communicate with creditors
If you anticipate difficulties keeping up with your bills, it’s best to reach out to your creditors as soon as possible, ideally before you miss any payments, to see if you can negotiate some relief.
Check your credit score
To rebuild your credit, it’s important to know where it currently stands. Credit scores are important yardsticks that lenders use to help gauge creditworthiness. You can check yours quickly and easily to get a “before” picture for your credit makeover.
Review your credit report
A credit report provides a history of how you borrow money and repay debts, and is therefore the basis for your credit score. Many lenders also review your credit report in detail when considering loan or credit card applications. It’s important to ensure your credit report at all three national credit bureaus (Experian, TransUnion and Equifax) provides an accurate picture of your borrowing and payment history.
You’re entitled to a free copy of your credit report from each bureau at AnnualCreditReport.com. Check all three reports carefully. If you discover any inaccuracies, you have the right to file a dispute with the relevant credit bureau to get the record corrected. If any report contains an inaccurate entry that hurts your credit score, its removal may bring score improvement.
Prioritize on-time payments
Payment history is an important factor affecting your credit score, so setting up a system that helps you avoid missing payments is a key piece of the credit repair puzzle.
If your credit reports reflect payments you missed or paid late by 30 days or more, those delinquencies are hurting your credit score. Missed and late payments remain on your credit reports for up to seven years. While the negative impact to your credit score will diminish over time, for long-term improvement, avoiding missed payments is crucial.
Pay down credit balances
High credit utilization — using more than roughly 30% of the borrowing limit on one or all of your credit lines — can lower your credit score. If credit utilization is elevated, paying down those balances could be one of the quickest ways to improve a credit score.
When working to reduce utilization, note that the account with the highest balance in dollar terms may not necessarily be the one with the highest utilization. Refer to the credit utilization for each card you have and prioritize payments accordingly.
Pay off collection accounts
If a missed bill payment is turned over to a collection department or agency, a collection account will be noted on your credit reports. Collection accounts can remain on your credit reports for up to seven years and adversely affect your credit score for its duration.
One way to end the hassle and potentially advance your credit repair efforts is to pay off the debts that are in collection. Doing so won’t remove negative entries on your credit reports, but it will lead to notations that the debts have been paid.
Keep track of your credit
As your credit repair efforts progress, routinely check your credit score to monitor improvement. Additionally, check your credit reports for inaccuracies that might hurt your score, including signs of unrecognized behavior that could indicate credit fraud.
For more information on improving credit, see the following articles: