The first step to fixing your credit is to understand that it will take time and patience. But you must start the process now. Putting it off for another year will only make it harder. By following the steps outlined below you will be on your way to better credit.
10 Steps to Fixing Your Really Bad Credit
Step 1: Understand that it will take time and patience to fix your credit.
Step 2: Go to annualcreditreport.com and get a copy of your credit bureau report from all three national credit reporting agencies. They are Equifax, Experian, and TransUnion. You can receive a free copy once every 12 months from each of them.
Step 3: Read through each credit bureau report thoroughly. Check for errors in your credit history. Pay special attention to late payments, charge offs, collection accounts, and judgments. Take detailed notes of each error you find or account you dispute.
Step 4: Send a registered letter, return receipt requested, to each credit bureau and creditor outlining the errors you have found and the accounts you are disputing. Attach information, such as receipts and statements, that support your dispute. If you prefer not to mail your dispute, you can also initiate a dispute online through each agency’s website. The links to initiate a dispute online for each major credit reporting agency are at the end of this article.
Step 5: Exercise patience. It may take a few months before the credit bureaus and creditors conclude their investigation of your disputes.
Step 6: While you are waiting to hear back from the credit bureaus, look at your open accounts and determine which ones are current and which ones are delinquent. Maintain on time payments on your current accounts. Bring your delinquent accounts current. If you cannot, contact each creditor on a delinquent account in writing and explain your situation and offer to settle the account for less than what you owe. Those delinquent accounts will be closed.
Step 7: If you have collection accounts, you will first determine if they are debts that you legitimately owe. Contact each debt collector and ask for proof that they own the account and who Is the original creditor. If you determine that the account is not yours, dispute it in writing to each debt collector. If you determine that the account is yours, offer to settle the account for less than what you owe based upon what you can afford to pay either in a lump sum or a short payment plan.
Step 8: If you have judgments on your credit bureau report this means that you were sued by a creditor in court and lost. You may or may not have been present when this occurred. If you believe that a judgment was entered against you in error, you may wish to contact a licensed attorney in your area to discuss your legal remedies to have this judgment overturned. If you are not disputing the judgment, you should contact the attorney representing the creditor and negotiate a settlement. Again, you may wish to contact a licensed attorney to help you with this process.
Step 9: If after disputing all errors on your credit bureau report, and reducing your debts through payment and or settlement, you find that you are financially unable to pay the remaining balances, you may wish to consider filing bankruptcy. A bankruptcy filing will protect you from your creditors while you sort out your finances either through a Chapter 7 or a Chapter 13. This is where you should consult with a licensed attorney experienced in bankruptcy. Most bankruptcy attorneys will offer you a free initial consultation to discuss your case. This is where you can ask questions and determine if bankruptcy is the right choice for you based upon your financial situation.
Step 10: Now that you have reduced your debts as far as you can, you are ready to begin the next step in rebuilding your credit, and that is to use credit. Your use of credit at this stage should not be to finance anything that you cannot afford to pay for outright. The sole purpose for your use of credit at this stage is to build up your credit history with on time payments which will increase your credit score overtime. If you have open accounts with balances, continue to pay them on time. If you do not have any open accounts with balances, you should open a new credit card account for the express purpose of pain the balance in full each month and never caring a balance into a new billing cycle. All you want is for that credit card company to report to the credit reporting agencies that you are paying your account as agreed. This will increase your credit score overtime which is your main goal.
Finally, you are on your way to fixing your really bad credit. Your continued patience and persistence will pay off in the long run. Remember to always pay your accounts on time. This is the number one factor affecting your credit score. As your credit score improves, you should contact your credit card companies and have your credit lines increased. This is an easy way to help boost your credit score. Remember to stay disciplined. A little thrift and sacrifice are a good thing. And so is having good credit. It is an asset that will benefit you for the rest of your life. What are your thoughts? Did you find this article helpful? Please take a moment to comment on this article and share it with someone.
Equifax | Experian | Transunion