Are you worried about bad credit undermining your ability to do important things, like buy a home, take out a loan, or get a job? It’s understandable if you believe having bad credit means you’re doomed, but thankfully, that’s not true. Bad credit isn’t the end of the world and you can fix it with the right strategy.
Bad credit is just a moment in time
Just because you have bad credit now doesn’t mean it has to stay that way forever. You have far more control over your credit report than you might think. Although, if you don’t take action, nothing will change.
Let’s say you have bad credit right now. That can change in six months to a year if you’re willing to put in the work. It’s actually not hard to repair your credit and increase your credit score, but you do need a plan.
If you start now and follow these simple tips, you’ll see your credit score improve with time.
Get a copy of your credit report
Before you do anything, get a free copy of your credit report from every major credit bureau (Equifax, Experian, and TransUnion). You are entitled to one free report every year, so take advantage of that offer. You can get your reports from AnnualCreditReport.com, which is the only federally authorized source for free annual reports.
Once you have your credit reports, review them all for accuracy. Check everything, from your personal details to open accounts and even credit limits. There are many common errors that turn up on credit reports, including:
· Closed accounts reported as open
· Inaccurate credit limits
· Inaccurate personal details
· Account mix-ups from having the same name as someone else
· Items that should have been removed long ago
Most errors shouldn’t be too bad, but some errors can restrict your ability to get a loan, qualify to rent a home, or even get a job.
Dispute every error on your credit report
Every single error you discover should be disputed. It doesn’t matter if it’s a big deal, like a delinquent account that isn’t yours, or your name being misspelled. Every error has the potential to hurt your ability to qualify for something that requires a credit check. Many systems are automated and will deny applicants based on an information mismatch. Even if it’s easily explained, you aren’t likely to get the chance.
Each major credit bureau has its own dispute process with required forms, but the general idea is that you’ll need to write them a letter explaining what’s wrong, request that it be removed, and include documents that support your dispute. It also helps to provide a copy of your actual credit report so you can circle the incorrect parts.
Each bureau has 30 days to investigate your request. If they find it to be irrelevant or frivolous, they’ll stop the investigation and may ask for more information. If a credit bureau won’t comply with your dispute, you can ask them to include your dispute in your credit report.
Talk to an attorney if you can’t make progress
If you don’t get anywhere with the credit bureaus, you can try to dispute the information with the business who reported your information. If that doesn’t work, your only other option is to hire a Fair Credit Reporting Act (FCRA) attorney. An attorney can help you get inaccuracies removed more easily because they will hold the bureaus accountable to the FCRA.
Consolidate your existing debt
If you have one or more accounts in collections, it’s worth considering consolidation. If you can negotiate a deal through a consolidation company, you’ll be able to get those accounts marked resolved on your credit report, which will look much better than having accounts in collections.
Start building good credit today
No matter how bad your credit is, start the process of building good credit right now. If you have credit cards currently, work on paying them off, and do what it takes to make your payments on time.
If you need to build a history of on-time payments, get a couple of secured credit cards from different financial institutions and use them to pay your routine bills, like your groceries and recurring monthly payments. Your payments will be reported to the credit bureaus and it will show up on your credit report.
If you have anything negative on your report, like a bankruptcy or eviction, you’ll have to wait for them to fall off your report at the appropriate time. Other than that, every effort you make will help you reach your goal of improving your credit.