How to Fix Your Poor Credit – 6 steps to bringing your credit under control

We live in a society based on credit. Although it is possible to go through life with a poor credit score, it can be difficult to buy expensive items like a home or cars. Fixing and then maintaining your FICO credit score can have far reaching effects that impact every area of your life.

A poor credit score doesn’t just affect your ability to buy high ticket items. Job opportunities, auto and home insurance, and many other areas can be impacted by poor credit. Deposits for utilities can be higher with poor credit, it’s harder to lease an apartment, cell phone contracts are more expensive or harder to get and it might be more difficult to get a job in certain fields, like management or the finance industry. Your credit score can have an outsized effect on your life if it isn’t properly maintained.

Credit repair is not instantaneous

No matter what reasons you have for poor credit, fixing it takes time. Even if you plan on using a credit repair service, there are several steps that you can take to begin the process. Understanding what you are trying to do will make it easier and give you an understanding of the way credit reporting works.

  • Get the latest copy of your credit reports. There are three credit reporting bureaus that determine your credit rating. You are entitled to a free credit report from each of them once per year. You need all three because some companies only work with one and problems may be spread over all of them. The three credit bureaus (Experian, Equifax and TransUnion) do not share information.
  • Review your credit reports for errors. Familiarize yourself with the information in the credit reports and identify any mistakes that were made by credit companies or reporting agencies.

If you can prove the mistake was made, send copies of your information to the credit bureau and ask them to review the entry.

  • Identify the areas you need to repair. After correcting any mistakes, the problems that remain will need to be repaired to fix your credit. Depending on your credit history, these will include past due accounts that are late or have been charged off, accounts that have been sent to collections and maxed out credit accounts.

Utilizing a credit repair company can help you determine the proper course of action with these areas. Credit repair companies, generally, are familiar with the process of paying off past due accounts. They can help you contact and negotiate with these companies to pay off your debt and avoid charge offs.

  • Get current on past due accounts. If you have accounts that are delinquent but are less than 180 days past due, you should catch these accounts back up. Preventing them from being charged off should be your first goal.
  • Pay off charged off accounts. Even if an account has been charged off you are still responsible for the debt. Many times, you can settle the debt at a lower rate than what is owed so the collection agency can make some money. No matter what you do, charge off and accounts sent to collections will remain on your credit score for seven years.
  • Rebuild your credit. Once you have removed all the poor credit on your report, you can start rebuilding your credit rating. Open new credit accounts, apply for a secured credit card and pay your bills. Do not apply for too much credit or credit you know you cannot get. Credit inquiries are added to your credit score and too many of them will lower it and make it more difficult to get credit.