Before we start I figured I would give you a little bit of background on when I started to realize I should pay attention to my credit score.
I went to college between 1998 – 2002. Back then they were handing out credit cards like club promoters hand out flyers.
I got about 5 credit cards, maxed them all out and didn’t make any payments. I also took out a loan from Dell to get TWO super-powered computers that I never paid off.
Apparently when you don’t pay companies back they get a little pissed off and they trash your credit score. I figured this wasn’t a big deal because I was paying cash for everything.
But as I got older and I wanted to do different things, like rent a car, I was finding that not having a credit card was becoming a huge pain.
Want a new car? Hard to achieve that with crap credit.
Thinking about a house? Stop thinking and move on to something else.
Even get a hotel room is a pain in the ass without a credit card due to the extra fees and holds they do to your account.
While I think it is awesome to pay everything in cash, there are times where you are simply better off with a credit card. Good credit makes life a lot easier, but I was never educated on these things.
I didn’t know the ins and outs of credit scores and all of the different things it is used for. I didn’t get another credit card until I was in my 30s and my wife put me on one of her accounts.
So I had pretty bad credit for almost a decade and while I could’ve been proactive in fixing it, I really didn’t know how or think it was even an option without a credit card.
This simple guide was written to help educate you on how you can start to repair your credit score so it no longer becomes a burden.
The Ultimate Guide to Fixing Your Credit Score
Having a good credit score lowers the stress you’ll have in your life.
I hated trying to rent an apartment knowing they would check my score or walking into a car dealership knowing I wasn’t going to get the best deal.
Having a good credit score is like having a good driving record.
It’s just better for your life.
In this guide, the aim is to help you get a firm grasp of where you are at with your credit score and then improve it from there.
Finding Your Credit Score
First things first, you need to find your credit score. Unfortunately, unlike with your credit report (yes, these are two separate things), the credit bureaus aren’t obligated to tell you what your credit score is once a year.
Interested in checking out your credit report? Just head to Annual Credit Report to get your free credit report once a year.
It’s hard to improve your credit score if you don’t know what it is, so how do you figure that out? Two services that I’d like to recommend are Credit Karma and Credit Sesame. Both of these services are free, but of course they will try to upsell you on some things.
Simply create an account and start keeping track of your scores.
The scores they provide are the same scores that most credit card companies and other lenders use to determine your creditworthiness.
If you want to get a score straight from the source, all the credit bureaus (Equifax, Transunion and Experian), offer $1 trials that last 7 days.
Once you have both your credit scores and credit reports you should be able to determine what is hurting your credit score. High balances on credit cards, collection accounts, charged-off accounts, settled accounts, and credit checks all have an impact on your credit score.
So now that you have an understanding of these things what can you do to fix your score?
1. Pay Down Credit Card Balances
This is one of the easiest ways to raise your credit score because credit utilization is one of the biggest factors that go into determining what kind of score you have.
What is credit utilization? It’s the ratio of your credit balance against your credit limit. So if you have a credit card that has a $1,000 limit and your balance on it is $900, then your credit utilization is 90%.
The lower your utilization the more likely someone is to lend to you.
Getting your utilization down to under 10% is ideal and your credit score should reflect that within a month. Don’t be surprised to see your credit score jump 40 points or more simply from taking care of your credit utilization.
2. Utilize Credit Report Investigations
Did you know you can make the credit reporting bureaus investigate the items on your credit report? Did you also know that they required to by law if you request it?
What you want to do is take note of everything that looks bad on your credit reports with the exception of accounts that are one or two months late right now.
For those accounts, you should give your creditor a call and ask them to waive the late payment fee that is associated with the late payment. Why are you doing this? Because many times the late mark will come off of your credit report or even prevent it from showing up in the first place.
How awesome is that?
Next you are going to be writing 3 separate letters to the different credit reporting bureaus. Actually, it’s one letter, but there will be 2 copies of it (3 total).
Here are the contents of the letter.
Your City, State, Zip Code
Name of Credit Bureau
City, State, Zip Code
Dear Sir or Madam:
I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.
This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.
Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.
The 3 places you are sending these letters to are:
- Equifax P.O. Box 740256 Atlanta, GA 30374
- Transunion Consumer Dispute Center P.O. Box 2000 Chester, PA 19016
- Experian P.O. Box 4500 Allen, TX 75013
You want to make sure that you are sending these letter via certified mail because you don’t want any funny business to go down. Certified mail also gets you a tracking number and proof that you send the letter. The bureaus will have 30 days to complete their investigation starting the business day after they receive your letter.
But we live in a digital world so can’t you just do all of this online? Mostly you can, but that means you are trusting technology to take over. When you file disputes they go into a database and who knows who is checking that database or what kind of systems they have in place!
The creditor is supposed to conduct an investigation, but that’s hard to prove if you file everything online unless there is some sort of verification and an email trial. Getting your letter into the hands of a human adds another step for the credit bureaus to follow through on.
After 30 days, you should hear back from the credit bureaus informing you of what they have found. If there was an error (fingers crossed), it should be corrected. If they don’t hear back from the creditor (that is making your life hell), then the account should come off of your credit report.
You will also be entitled to see an updated copy of your credit report, even if you’ve already used your free copy from Annual Credit Report.
It’s important to keep in mind that just because an investigation led to a removal, that doesn’t mean it can’t be added back again in the future so always keep an eye on your credit report.
Removing Collections Accounts
This is where a lot of shady business goes down.
Collections accounts are the big red ugly items placed on your report by agents acting on behalf of creditors. This is where it gets shady. These debt collectors can just throw an account onto your credit report in the hopes that you pay it off. They call this practice parking a debt and it’s not illegal, just really scammy.
When an agent is working with a collections account they have to abide by the laws set forth in the Fair Debt Collectin Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA).
These two acts provide a number of rules that collection agencies must follow. One of the more important ones is that they must provide you with a written notice in regards to your collections account.
If you’ve ever been in debt then you know about the phone calls from numbers you don’t recognize. Debt collectors can call you, but this is not a replacement for the required written notice. In fact, they are required to send you a letter detailing your debt within 5 days of their first contact with you.
If they fail to do that then they have violated the FDCPA. The same thing applies if they’ve failed to tell you that they are going to report the negative information to a credit reporting agency.
What happens if you catch them? Then you usually wind up with an offer to pull the account from your credit and possibly wipe out the debt completely depending on what you owe. You should consult with a consumer attorney about this process, however, but most are happy to take you on as a client.
Once you receive the letter from the collection agency you need to send them a debt validation letter to ensure that you always have the right to dispute the debt.
Your debt validation letter should include:
- Your name, address and phone number
- Original account number or file number
- Statement disputing debt and requesting validation
- (Optional) Request for contact to halt
- (Optional) Electing consumer arbitration
What happens if you’re reading this post now and you received a collection letter 6 months ago? It’s okay because you can still send them your debt validation letter to get them to acknowledge the facts about the debt.
Statute of Limitations
For most of us in the United States we need to wait 7 years for negative information to come off of our credit report. New York residents are a little bit luckier since they only have to wait 5 years.
The secret that most people don’t know is that most consumer debts have a statute of limitations of only 3-6 years. It depends on what state that you live in. The information can still remain on your credit report for the full 7 years, but the debt collector can no longer attempt to collect the debt.
Good Credit Score Equals More Options
Having a good credit score provides you with more options in life. Need to finance that new computer since yours suddenly crashed? Not a problem with a good credit score.
Broke up with your partner and it’s time to move out? No problem with a good credit score.
Staying on top of your credit score will provide you with a sound peace of mind.
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