If your credit score is less than ideal, you can take a series of steps on your own to improve it, known as DIY credit repair. Having a poor credit history can make it challenging to access loans, credit cards, and other forms of credit, which can lead to a difficult future. Therefore, it’s crucial to take credit repair seriously. In fact, potential employers may even check your credit history before hiring, making it all the more important to work towards improving your credit score.
Improving your credit may seem like a daunting task, but it’s possible to actively work towards it. To begin your credit repair process, you should ensure that you have the following documents and information readily available:
- Your Social Security number (SSN)
- Your name and DOB
- Your address
- Account information
- Online access to your accounts
In the following section, we will discuss crucial steps that you can take to repair your own credit.
Acquire Your Credit Score and Three Credit Reports for Free
As per the Fair Credit Reporting Act (FCRA), there are three primary credit bureaus – Experian, Equifax, and TransUnion – that assess individuals’ credit history. Each of these bureaus is legally obligated to offer you one free credit report annually. (Due to COVID-19, you can currently access a free copy of your credit report every week until April 2021.)
The credit reports offer a detailed overview of your credit history, highlighting the factors that may be negatively affecting your credit score. While you can choose to spread out the free credit reports over the year, it’s advisable to access them all at once, especially if you’re working on repairing your credit. This will help you gain a better understanding of your standing with each credit bureau. Additionally, you can also obtain your free credit score from a verified site or your credit card lender if they provide this service. It’s always a good idea to keep track of your credit score and monitor any changes over time.
It’s crucial to remain cautious of fraudulent sites while accessing your credit reports. AnnualCreditReport.com is the only site you need to visit for your free credit reports. Many fraudulent sites may attempt to deceive consumers into sharing sensitive personal information. Therefore, it’s essential to rely only on resources approved by the Federal Trade Commission (FTC) to avoid falling prey to such scams.
Thoroughly Analyze Your Credit Reports
Carefully examine each credit report for items that could potentially harm your credit score, such as:
- Typos or errors in your personal information
- Late payments
- Maxed out accounts
- Unknown accounts (could be a sign of fraud or ID theft)
- Accounts you requested to close, but are still open
- Accounts that have gone to collections
Don’t forget to document each negative mark you come across, along with the associated creditor or account. You’ll need to address each negative mark individually, which is why keeping track of them is essential.
Resolve Accurate Negative Marks on Your Credit Report
If you come across any accurate negative marks on your credit report, you’ll need to approach the creditor responsible for it, rather than the credit bureaus.
Accurate negative marks can be removed from your credit report either by waiting for them to drop off after a certain period or by contacting your creditors directly. Although creditors are not legally required to remove such marks, they may do so in certain cases.
You may request your creditor’s assistance in resolving delinquent payments and accounts by setting up payment plans or exploring alternative solutions. This can have a favorable impact on your credit, as taking care of past-due payments and unwanted accounts can help improve your credit score.
Alternatively, if you have a good track record with your creditor and typically make timely payments but have a late payment on your credit history due to an exceptional circumstance, you can consider writing a goodwill letter to your creditor and request them to remove it as a gesture of goodwill.
Challenging Inaccurate Items to Get Them Removed from Your Credit Report
In case you discover any negative and incorrect items on your credit report, you have the option to challenge them by contacting the credit bureau that reported them.
You can file your credit dispute through different methods, such as online, over the phone, or by mail, depending on the bureau’s preferred method. When disputing, you should include any false items, including incorrect personal information, reported by the bureau. Below are some examples of inaccurate negative items and steps to dispute them.
If you come across an account that you requested to close but it’s still showing as open on your credit report, you should contact the lender to confirm whether the account has been closed or not. If the account is closed and still showing as open on your report, you can dispute this false information with the credit bureau.
In case you come across accounts that you don’t recognize, it could be a sign of identity theft or fraud. To address this issue, you should contact the organization holding the account immediately and initiate an investigation. Work with them to have the account removed and keep records of your communications as evidence for an identity theft investigation.
Once the credit bureau accepts your dispute claim and verifies the inaccuracy of the negative item, they should remove it from your credit report. This removal can potentially improve your credit score, depending on the impact of the item. However, if the bureau refuses to remove the item, you’ll need to continue working with them to escalate the dispute and request the inaccurate reporting to be removed.
Below are the steps you can follow to achieve a successful outcome:
- Collect proof (statements and other documents) to support your dispute.
- Write your dispute statement. To make your dispute letter clear and straightforward, start by listing the items you wish to dispute. Then, address each item individually, providing an explanation for why you believe it is inaccurate and requesting its removal. You may need to include copies or excerpts of supporting documents to strengthen your case.
- Document your dispute with copies of your statement. If you choose to file your dispute online, take screenshots for your records. If you opt for mailing your dispute statement, ensure that you use certified mail to obtain verification.
- Submit your dispute and stay tuned for the results of their investigation. Submitting your dispute online is the easiest way to document and track its progress. You can use the table below to find the necessary contact information based on your preferred submission method.
Review the Decision and Respond if Required
Within 30-45 days of receiving your dispute statement, the bureau is required to respond to you. During this period, the bureau will send your statement and relevant information to the organization that reported the disputed item. The organization will then investigate the dispute and send its findings to the bureau. Once the investigation is completed, the bureau will send you the results.
After receiving the results of your claim, it is important to review them carefully. If the results are in your favor, congratulations! The bureau will take care of removing the negative item from your credit report.
What to Do if Your Claim is Denied?
There are several additional steps you can take if the results of your credit dispute are not what you expected, including:
- Contacting the lender directly who reported to the bureau and gain additional information (if needed).
- File a new dispute with the bureau that includes new information so the bureau can approach the creditor with additional evidence.
- Add a consumer statement to your credit report. Rewritten: In case the results of your claim are not satisfactory, you can opt to add a statement of up to 100 words to your credit report to explain your situation. This statement will be visible to any organization that accesses your report. However, remember to ask the bureau to remove the statement once the negative item is removed from your report.
- Bring your issue to a higher authority. If you have exhausted all options and believe that a fair resolution is not possible, you can file a complaint with the Consumer Financial Protection Bureau or consider seeking legal advice, depending on the circumstances.
Tips to avoid applying for multiple lines of credit at the same time.
During the process of repairing your credit, it is advisable to refrain from applying for new lines of credit, if possible. Applying for credit results in a “hard inquiry” that is recorded by the credit reporting agencies and influences your credit report and score. Repeatedly applying for new lines of credit, such as multiple credit card applications, within a short period can harm your credit score.
During the process of rebuilding your credit, it’s important to be cautious about the number of hard inquiries on your credit report. People with good credit scores may be able to apply for credit a few times a year without significant impact, but for those working to improve their credit, it’s best to limit the number of hard inquiries as much as possible.
Maintain Positive Credit Habits
Establishing and maintaining good credit habits is crucial for improving less-than-ideal credit and maintaining good credit in the long run. Make these practices a habit to ensure a positive outcome, regardless of how your claim turned out.
Pay bills on time
To safeguard your credit score from further damage, ensure to pay your bills on time. Late payments by 30 days or more can be reported to the credit bureaus and negatively impact your credit. While making the minimum payments can help avoid late fees, it won’t prevent accruing interest charges. Therefore, setting up automatic bill payments is a wise decision to ensure timely payments.
Pay off debt
There are several strategies you can use to pay off your debt:
- Adjust your spending habits. If you have not defaulted on your payments yet, it is recommended to adjust your budget and spending habits to ensure that you can make at least the minimum payments. The more you can pay towards your credit card debt and loans, the better.
- Consider consolidating your debt. Debt consolidation is a process of taking out a single loan to pay off multiple debts with higher interest rates, and then repaying that loan in place of making multiple payments.
- Talk to your lender. If you’re struggling to keep up with your payments, it may be worth reaching out to your lender to see if they’re willing to negotiate a new agreement and payment plan that works better for your current financial situation.
Keep Your Credit Card Balances Low
Keeping your credit card balances low is crucial to maintain a good credit score. Your credit utilization, which is the amount of credit debt you have compared to your credit limits, accounts for 30% of your FICO score and 20% of your VantageScore. Therefore, it is important to avoid borrowing more credit than you can afford to pay off.
It’s important to remain patient and consistent while rebuilding your credit. Continue to practice responsible credit habits as mentioned earlier to see improvement in your credit score. Once you have paid off your debts and have a good grasp on proper credit habits, you can start building new credit to further boost your score with positive tradelines and habits.
DIY credit repair resources
Below are helpful resources to help you pay off debt and repair your credit.
- Federal Trade Commission (FTC): Credit Repair Guide (PDF)
- Federal Reserve: Credit Score Tips (PDF)
- FTC: Avoiding Credit Repair Scams
- FTC: Settling Credit Card Debt
- IdentityTheft.gov: Identity Theft Letter to a Credit Bureau
- USA.gov: Debt Resources
If you find the credit repair process overwhelming, seeking assistance can be a wise decision, especially if you have complex circumstances. A free credit report consultation can provide valuable insight into your current credit status and help you determine the best course of action. Our experienced team can help you with the heavy lifting and guide you through the credit repair process.
Note: The content presented on this blog is not meant to serve as legal, financial, or credit advice. Its purpose is solely to provide general information.