Improve Your Credit Score in Six Steps: Credit Repair for Dummies
It is on the minds of millions of Americans: How can I adequately, economically, and efficiently improve my credit score?
Your credit score can adversely affect so many different aspects of your life. Even job applicants are being passed over due to poor credit reports. Insurance premiums are often decided, in whole or in part, by a candidate's credit score. Therefore, it's relatively safe to say that a poor credit rating can definitely affect your quality of life. But the process of improving your credit score doesn't have to be a struggle. There are several resources available for the purpose of doing just that. Though the process may be lengthy, it is usually well worth it, and there is no shortage of qualified industry professionals to help you navigate the trail. For that person who is starting their journey along the path of credit repair, these tips from top resources could prove quite useful.
Step 1 – Clean up your (credit) act: First, clean up any errors that show up on your report. This is a simple process that could also require some patience on your part. According to Forbes.com, nearly 70 percent of all credit reports have errors on them; some that could have a serious effect on your score. To improve your credit, this is an essential first step to take.
Step 2 – Debt repayment: Develop a debt repayment plan and stick to it. It is important that you understand the terms of the agreement, especially if you're contracting with a credit repair agency. You can always negotiate your own plan with creditors but sometimes for the sake of consolidation; seeking help from a qualified credit repair service might be helpful and more efficient. There are also non-profit credit counseling and consolidation agencies available to help you negotiate a fair credit improvement plan.
Step 3 – Pay major credit qualifiers first. On time, every time: Any debt, such as credit card debt, mortgage or rent payments, and utilities. The more accounts that you have that are current and in good standing, the better your score becomes. Furthermore, as your number of good standing accounts increases and your delinquent accounts slowly get paid off and come current, the better your credit score becomes.
Step 4 – How to deal with lack of credit: If your problem relates to lack of credit, it can definitely be frustrating to try and establish credit. A good way to work around this is to open a secured line of credit with your own money. This is typically done through a bank. Most services will help you obtain a secured line of credit when you have no credit to show because they don't really have much to risk. Be wary, however, and make certain you understand fully the terms of the credit line agreement, especially if there is an APR, annual fee, or any other financing charges for carrying your secured credit line. Once you've made some timely payments, you may be able to build upon your momentum and apply for an unsecured credit line.
Step 5 – Limit your overall credit activity: Be careful of the amount of credit accounts you apply at once or have open at a time. This is a huge red flag for the credit bureaus and could indicate that you're cash poor. That makes some credit agencies nervous because if at any time the rug gets pulled out from under you, say you lose your job for example, then they're not getting paid. So make sure that you have a strong income to debt ratio and keep all credit accounts paid down as low as possible.
Step 6 – Consider a security freeze: During the process of improving your credit, it also might be a wise idea to put a security freeze on your credit report, especially if you've been victim to identity theft. This is also used to prevent identity theft. No new accounts can be opened during a security freeze until it has been lifted.
It is true that the process of credit repair can be a time consuming and, at times, an overwhelming one. Laying some strong groundwork is first and foremost to start the process. Researching and being knowledgeable about the process can help you determine if the time, effort, and money is something you can manage on your own or if it would make more sense to hire a professional. Obviously there are pros and cons to either scenario but in each unique situation, the best decision is the one that leads to positive results.