There are several steps you need to take if you want to improve or repair your credit ratings and scores. They include:
Request and review your credit report: First and foremost, in order to improve your credit score, you need to determine what your current situation is. Per federal government law and regulations, you can get for free one copy of your latest credit report from each credit agency each and every year. (Experian, Equifax, and Trans Union). You can decide to get all three credit reports at once, or you can decide to get them and spread them throughout the year.
After you receive your credit report, the most important thing you need to do is to to review the credit report for accuracy. You need to be 100% sure that your credit report is accurate before you can even consider fixing and improving your credit. It is already difficult enough paying for your own mistakes, and you do not need to pay more money, higher interest rates, or to be penalized for someone else's mistakes on your credit. The two biggest red flags that creditors and others look for, such as insurance companies, employers, and others, are late or missed payments on your part and the next big red flag is maxed out credit cards or loans. Find out what determines how your credit score is determined.
Have incorrect or incomplete negative items removed from your credit report. To have them eliminated from your credit report, you will need to write to the three credit bureaus and you will need to tell them that the items on your report are either incomplete or inaccurate. Demand to have them removed. After you challenge a debt or some other item on your credit report, the bureau or agency you notified has up to 30 days to receive a response from the creditor in question. That company needs to validate the debt. If the credit bureau doesn’t receive a response the company in questions then by law they need to remove the incomplete or inaccurate entry from your report. Always remember that there are three agencies, so you have to write to all three of them to get it removed in order to repair your credit. If you only have the items removed from one two of the reports, it will not help as all 3 agencies impact your total credit score.
The credit report you receive is your guideline and the most important tool you have to repairing your scores. Each and every account on your credit report will have a rating next to it which is critical to creating your overall profile. In addition, a sample credit report will be provided to you to assist you with reading and understanding your credit report. Since there are 3 different credit bureaus, the rating and scoring system may change and differ depending on the exact agency. As one example. A letter on your report that is followed by a number indicates the type of account that you have as well as the credit rating. Guidelines in place include :
Next, now highlight everything on your credit report that is not a 1 and then highlight everything that has been turned over to collections by your creditors. Now, make a list that shows the debts you owe from the lowest dollar amount to the highest. Then be sure to start with the lowest amount on your report, and either pay down that outstanding debt, negotiate to eliminate it, or dispute it. Starting with the lowest amount, which can be paid off sooner that a higher amount, will make the most difference. Paying down debt in a short period of time will improve your scores.
Why is your credit rating so important. Whenever you apply for any type of loan, mortgage, credit card, phone hookup, and sometimes even now a job, your credit rating will be pulled and reviewed. Businesses that conduct this form of credit reporting can do many things with it. For example, a score is required for banks to issue a consumer new credit or debit cards, stores to accept checks, and for a wide variety of businesses to manage their operations. So knowing your credit rating is very important for a number of reasons. Depending on your various credit scores, lenders and banks will determine your risk. An increasing number of employers are now running credit checks on potential employees as well as this can help them determine how fiscally responsible a job candidate is.
Keep in contact with your creditors. The moment that you realize that you are or may soon be facing a financial hardship, you need to contact your creditors. Sped is of the essence here. Call your credit card companies and ask for help with your credit cards.
If you do this months after the fact, and after you start receiving calls from debt collectors, then it is too late. The damage to your credit has been done, and it may be to late to repair it. Most creditors out there are not as cutthroat as you may think, and many businesses will work very closely with you to help your thru a difficult period. They will often schedule smaller payments that fit your budget for a period of time. Think about it. After all, a creditor would much rather receive $20 or $30 payments on your bills for a certain period of time than risk you filing for bankruptcy in which they would get nothing in bankruptcy court. Most creditors are much more likely to work with you, settle debts, accept your offer of lower payments, and keep your credit rating up if you can show good faith and communicate with them as early as possible. Many even offer forbearance programs to reduce fees or interest rates. More.
Get any agreements in writing. After communicating with your creditors, if you are successful in negotiating lower interest rates, setting up debt payment plans, settling debt, or if you are agreeing to credit card debt or medical debt balance payoffs, be sure to request from your creditors that they send a letter confirming the arrangement. Be sure to keep it in your files. Read more credit card debt assistance programs.
You need to have it in writing, as it is your best defense against lost records, employee turnover, change in ownership, changing minds, new managers being more aggressive on debt collection, or any other number of other things. Even after you pay off all of your debts and unpaid bills, you need to make sure that you get a debt settlement letter from your creditor. After you receive this, send a copy of the settlement letter to the credit bureaus. This needs to be sent to all three of them so that they can update and repair your ratings and scores.
To improve your credit scores, keep some of your credit cards and accounts active and open. Never close more than one or two credit cards every six months or so. Credit scores are very likely to decrease due to any pick up in activity of any kind, even if someone is just closing an account. Increased activity reflects poorly on your credit scores, rating, and financial stability.
When you do decide which accounts to keep active and open, be sure to keep the one or two oldest accounts open and active. As the second or third-biggest factor in repairing and improving your credit score is your total length of credit history. For example, having 5 credit card accounts open with zero balance on all four of the accounts and having a balance of $500 on one credit card lowers your credit risk and does more to repair your credit scores then having 2 accounts open with a $250 balance of each credit card.
You will need to show that you are responsible with managing high outstanding balances and credit lines, so you will want to have high limits on your credit cards but keep a low balance on them. This is another very effective tactic in how to improve your overall credit scores. In addition to this, it will help to have a high balance on a credit card that you have paid off timely.
Pay off your medical and credit card debts to repair credit scores. After you have determined how much money you can pay against your outstanding debts, and after you have negotiated any settlements or lowered payments, you then need to allocate that portion of your monthly budget to paying off each and every creditor. You have to be 100% committed to paying the minimum on your debts and bills (or pay the agreed upon amount if it is lower) to each and every creditor, month after month. It is critical to make these payments on time. This consistency and timelessness of payments is very important to repairing and improving your credit. If you have any extra cash that month, be sure to then pay any extra money against the lowest outstanding balance due on a debt. Another big factor in why people have poor credit scores, and how people can repair their credit, is the fact that total credit card and medical debt outstanding makes up about one third of your total credit score. So be mindful of those limits and thresholds.
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