Absolutely! Bad credit is both stressful and costly, but you can take steps to repair it.
Following are a few steps to follow:
Stop Using your credit cards and don’t apply for any new ones. One of the worst things you can do is to continue accumulating more debt by using your credit cards or by applying for new ones. Put existing credit cards away until you have control of the situation. Any new applications may well be turned down and the decline will further reduce your score.
Get and review a copy of your credit report. You need to know exactly what you need to work on to begin repairing your credit. Highlight negative listings and rank them according to damage they are doing to your credit picture. Following is a list in order of damage to your credit:
- Bankruptcy
- Foreclosure
- Repossession
- Loan Default
- Court Judgments
- Collections
- Past due payments
- Late payments
- Credit rejections
- Credit inquiries
Creditors are required to notify you of any negative information they have placed on your credit report. If you have not been notified you can pressure the creditor to remove the listing.
Request corrections and challenge questionable items. You can not legally remove accurate negative information from a credit report, but the law does allow you to request a reinvestigation of information in your file. However, you can legally challenge anything on your credit report. The key to the credit repair procedure is that if the credit bureaus cannot verify information on your credit report they must remove it. Specifically, if a credit bureau cannot contact a collection agency which is reporting a collection on your report, they cannot verify the information, and must delete the entry.
Document your credit repair efforts. Document every correspondence and send every correction or challenge by certified mail. Keep a file outlining everything that you do. The credit bureau has 30 days from your dispute letter to investigate the legitimacy of the negative listing. They are required to notify you in writing the results of the investigation within five days of its completion. Be persistent in making sure that this is done.
Get current on delinquent accounts. Remember that your credit history makes up about 35% of your credit score so getting current on your delinquent accounts will have a great impact on your credit.
Be careful when closing credit cards. You might be tempted to close out credit card accounts that have become delinquent, but don’t. Before you close any account make sure that it won’t negatively affect your credit. Some things to consider:
- Don’t close a credit card with a balance. The available credit is lowered so it looks like you are maxed out.
- Don’t close your only credit card with available credit. This decreases available credit thereby increasing credit utilization and lowering the score.
- Don’t close your only credit card. You want to keep a credit card in the mix because you want different types of credit reflected which will increase your score.
- Don’t close your oldest account. Your credit score is based on the length of your credit history so you want to keep the older cards open.
- Don’t close the credit card with the best terms. Don’t let a good one go. Keep this credit card for emergencies.
Call your creditors. Talk to your creditors about your situation. Many of them have temporary hardship programs that will reduce your monthly payment until you can get back on your feet.
Pay off your debts. You will have to start paying off your debts to improve your credit situation. Concentrate on the highest interest rate card and get it paid off. Then move on to the next one. Create a plan and outline how you will do it. Then stick to the plan.
Repairing your credit can be a time consuming task. Typically it will take 6 months to get all of the adjustments made in your credit report. However, the payoff at the end is well worth the effort so don’t let the time concern you. Be patient and don’t expect to improve your credit over night.