A Framework for Credit Repair
Credit is your reputation for paying money back to those who lend it to you, and it’s a reputation that is very important and impactful in multiple avenues of life. Credit is used sometimes when considering someone for a job, an apartment, utilities, and both auto and home insurance. If you’re currently needing credit repair, know that it’s not an overnight process, but so worth it in the end.
Figuring out where you stand
In order to repair your credit, you must know everything that needs to be repaired. For this step you will need to pull your credit report. Generally you should pull only one credit report and the others throughout the year. To gather a total picture of what needs to be done for credit repair, you will need to pull a report from Experian, Equifax, and TransUnion. Through annualcreditreport.com you are entitled to one free credit report from each of the three credit bureaus each year. Once you have retrieved all three of the credit reports, it’s time to sit down with a highlighter and read through them. There are three main parts that make up a credit report: identifying information, public records, and credit items.
- Identity information should have the addresses, social security numbers, and names associated with you.
- Public records should include judgements or liens that have been made against you.
- Credit items should include all credit accounts that have been open in your name and the status of them.
Reviewing the three parts of the report one by one on each of the reports will help to find any inconsistencies. Highlight anything that doesn’t look familiar to you. It’s now time to dispute the inaccurate information. In order to dispute the errors on your credit report, you must gather as much evidence as possible to show that the item is an error. For example, you find an incorrect credit item, you will need to send a copy of the item on the report, proof that the item is incorrect, and a dispute letter to the credit bureaus. If you do not have any proof, still send in the other items mentioned previously. You can submit a dispute electronically and through the mail. When sending electronically, be sure to take screenshots of your correspondence. When sending through the mail it is best to send via certified mail so there are time stamps when the dispute is received. The credit bureaus as well as any business you send a dispute to are required to respond unless they consider it frivolous.
Handling the accurate items
The next step in credit repair is to handle those accounts that are accurate but not in good standing. But before you start to try to pay things off, create a budget so that you know what money you have to pay creditors back. Knowing what you have is important to know so that you can keep up with your current obligations. The first accounts that you may want to focus on are past due accounts that have not been turned into charge offs. If you can start to pay on those and keep them from becoming charge-offs then it won’t further damage your credit. Charge-offs are any account that has been written off as bad debt with creditor, usually after 4-6 months of not satisfying the payments. After charge offs have been handled, then you can look at paying judgements and liens. Starting with smaller accounts can help you to feel very accomplished and lessen the likelihood of giving up. Focusing on accounts with high interest rates can also help you save more money over time.
Remember credit repair is not an overnight process, takes patience, and encounter bumps along the way. To learn more about credit repair and other related topics, check out our free seminar series.