If you've recently been rejected from a credit or loan application, it may be because of your credit score being too low. If that’s the case, there are a number of reasons why that may be. Maybe you made several late payments on your credit card or loan. Perhaps you have an outstanding judgment against you or have even been a victim of fraud or identity theft.
No matter the reason, you're probably looking for ways to get your credit score back on track. Tread carefully! There are a lot of dishonest opportunists looking to make a quick buck off of your pressing need. Don't become the next victim of a credit repair scam. In fact, there's nothing a credit repair company can do for you that you can't do yourself.
This probably has you wondering how to differentiate between the legitimate steps you should take to repair your credit from the harmful, costly actions. Look no further! Our handy guide of credit repair dos and don'ts will help get you on the road to improving your credit score.
Do: Determine your actual credit score
If a recent credit application of yours has been denied, don't take it at face value – find out why it happened. The three major credit reporting agencies – Equifax, Experian, and TransUnion – are each required to provide you with a complimentary copy of your credit report once a year, upon request. To order yours, visit annualcreditreport.com or call 1-877-322-8228.
If you've already requested a report from each of the agencies in the last 12 months, you can still get one free of charge; you are entitled to a free report whenever a company takes adverse action against you, such as denying your application for credit, insurance or employment. To qualify, request a report within 60 days of receiving notice of the action.
Do: Review your report and dispute any errors
Once you receive your report, review it for inaccuracies. If you spot any fraudulent purchases or erroneous information, you'll need to dispute them with the credit bureau. You can do this online, over the phone or by mail. In your dispute, identify every item you are disputing and the reasoning behind your claim. Include copies of documents that support your stance, and ask that the errors be removed or corrected. If you send your dispute by mail, it's best to send your letter by certified mail so you can ensure it is actually received by the credit reporting company..
Also, keep a personal copy of your letter and all supporting documents for your own records.
You'll also need to dispute the charge with your actual creditor, taking the same steps you did above.
Don't: Expect any quick fixes
As anxious as you may be to improve your score, know that there is no "quick fix" for creditworthiness. Enhancing your score takes time, hard work and creating and sticking to a realistic debt repayment plan.
If your credit score is poor, you may be bombarded with promotional material from credit repair companies that promise to increase your score by 100 points in less than a month. If you think these claims sound too good to be true, you're absolutely right. Although there are some legitimate credit repair companies out there, there's nothing they can do for you that you can't do on your own without paying their hefty fee.
Do: Take steps toward fixing your credit
If you've determined that your credit report is accurate, you'll want to take a careful look at the habits leading to your unfavorable score.
Are you timely with your credit card payments? If you're consistently late, consider setting up an automatic bill pay system so you never forget to make a payment. Are you making headway on your debt? If you're paying your bills on time, but your debt is not going anywhere, it's time to rethink your spending habits. Don't shop with credit cards; use only debit or cash. Look for ways to trim your expenses, like couponing wherever possible, planning dinner menus around sale items and finding free ways to relax instead of blowing money at a restaurant or on retail therapy.
Are your monthly bills unmanageable? If you can't make it through the month and still meet your minimum payments, your debt may need an overhaul. Consider debt consolidation, in which your debt is transferred to one low-interest account, or a balance transfer to a card with an interest-free introductory period. Be aware, though, that a lot of open credit is not considered favorable by creditors; close as many accounts as you open – but leave your oldest one open as it shows a longer period of credibility.
Also, no card is interest-free forever. You may be hit with higher than usual interest rates when the introductory period ends. Alternatively, you can contact your creditors and work out a more reasonable payment plan.
If these options don't sound feasible, try finding ways to increase your income instead, using all extra cash exclusively for paying down your debt.
Don't: Expect to see any changes immediately
Don't fret if you've made strides toward fixing your credit and haven't yet seen an increase in your score. Creditors will only report to the credit reporting agencies periodically, usually once a month. It may take up to 30 days or more for your account to be updated and your score to improve.