Lots of people run into financial jams or simply make some mistakes that hurt their credit. If you ever have damaged credit, understanding the basics of credit repair is top priority. There is no magic to credit repair. You need patience and self-discipline. MyFICO.com says not to get taken in by promises of a quick fix. Credit repair takes time, but it is usually something you can do yourself without paying a lot of money to a credit repair service.
Your Credit Report
Before you can repair your credit, know where you stand. Your credit rating and credit score are based on the information in the credit reports maintained by the three major credit rating services: Experian, TransUnion and Equifax. You can get a free copy of your report every year from each rating service through the Federal Trade Commission’s authorized provider, AnnualCreditReport.com. Check your credit report for incorrect listings of late payments and amounts owed. If you find errors or entries that look suspicious, such as an account you don’t recognize, contact the credit rating service. The rating service will investigate and if the item is erroneous, correct your credit report.
The thing that counts most in determining your credit rating is your record of late payments. Payment history counts for 35 percent of your credit score. Payments more than 30 days late are especially damaging. . To repair your credit, there is no substitute for getting your bills caught up and keeping them caught up. If you run into trouble, contact your creditors. Many lenders will not report an occasional delinquency if you make and keep arrangements to get your account current. To help you remember due dates, ask for automatic payment reminders from the creditor.
Pay Off Debt
Another big part of your credit rating is the amount and type of debt you owe. Paying down debt is a big challenge for many people, but it is essential if you want to repair your credit. The place to start is with credit cards. Stop using them entirely if possible. If you must use a credit card, make it the one with the lowest interest rate. Add as much extra money as you can to the monthly payment for the highest interest card. Pay the minimum on the others. Once the highest interest card is paid off, start putting as much as possible each month on the card with the next highest rate.
When you are paying every bill on time and your debt is coming down, avoid opening any new credit accounts unless you have good reason to and do not open several accounts in a short time. This is viewed as a signal you aren’t managing your finances very well. When you pay off a credit card or other debt, don’t close the account. The length of time you have used credit counts toward your overall rating. Long-standing accounts lengthen your credit history and raise your credit score. A paid-off credit card account is a valuable asset, even if you cut up the card and never use the account again.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.