13 Simple Steps to Repair Your Credit

how to repair credit

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No one sets out to lower their credit score, but it can happen all too easily. Forgetting to pay a bill, losing your job and not having enough income to pay everything, or having an unexpected medical emergency can all affect your credit score in many cases. And by the time you get caught up, the damage is already done.

So that can leave many people asking how to repair credit. Fortunately, there are some steps you can take to repair your credit and raise your credit score back up to an acceptable level, which is important if you want to qualify for a mortgage or get a favorable interest rate on everything from car loans to credit cards. Here are the steps to take if you want to repair your credit.

1. Start paying all your bills on time.

Carelessness with paying bills is expensive–it can cost you hundreds or sometimes thousands of dollars a year in increased interest compared to what you could be paying if your credit was good. Making sure you have adequate income to pay every bill on time, and that you are organized enough to follow through and not forget anything is the first step to better credit, and it really isn’t worth following any of the other steps if you’re not going to make a firm commitment to paying everything on time.

2. Check all your credit reports.

There are three different credit bureaus that issue reports: Experian, Equifax, and TransUnion. You can never be sure which one any particular creditor will check, so you need to know what is on each of them. The credit bureaus are required to provide a free copy of your credit report each year, so you can go to each website and request a copy, or you can use a site like Credit Karma to get the reports.

When you’re concerned with how to repair credit, checking the reports is key, you want to see if there are any damaging items listed, what they are, and your credit score–usually between 500 (poor) and 800 (excellent). If your credit is ranked as “good” (670 on the FICO scale or 700 on Vantage, or higher), you may not want to spend the time repairing your credit, but if it is below those levels, it is advantageous to raise it.

3. Dispute negative items. 

Creditors make mistakes all the time in how they report items to one or more of the three credit bureaus. Maybe you paid a bill late but the creditor didn’t report it paid. There are often mixups with medical bills in which the insurance company pays the bill, but it still goes to collections. A number of different scenarios may result in incorrect derogatory items appearing in your credit history.

If you see something on one of your reports that you think is incorrect, you have the right to dispute it and of course, if validated, the correction may repair credit score damage. This can be done by writing a letter to the credit bureau, but the easier way is to dispute it online. The credit bureau must then investigate the item and remove it if they can’t substantiate it. Getting incorrect items removed can raise your credit score by more than 100 points in some cases, depending on whether the item was recent or how many items are removed.

4. Dispute late payments.

Some of your recurring bills are reported to the credit agencies by creditors if they are paid late. Some examples of these bills are credit cards, student loans, and car loans–bills with outstanding balances in which you owe money and have regular monthly payments. If you see a late payment that you think is incorrect, you can ask for it to be removed. This can also improve your credit score.

5. Dispute negative items even if they are accurate.

In some cases, you did pay a bill late and it was reported accurately to one or more credit bureau, damaging your credit. You are not limited to disputing negative items that are incorrect; you can also dispute items that you know are correct, and in some cases, they will be removed from the report even if they are correct because the creditor does not provide documentation to show that you really didn’t pay.

Not everyone will be comfortable with this tactic and some people may feel that it is taking advantage of the system. However, it is perfectly legal if you want to try it. In fact, this may be a good course of action when one negative item is dragging your score down and you need a better score to get a car loan or mortgage–as long as you don’t take advantage of the process by securing more credit than you can afford and then don’t pay as agreed.

6. Go straight to the creditor.

When you have paid the bill, you can ask the creditor to remove the item from your credit report so that it will not even show that it was paid late or went to collections. The creditor has the right to remove any item from your report at any time, so even if they have refused to do so previously, you might as well ask–and do so directly by phone or email, not through the credit bureau disputing process.

7. Open new credit card accounts.

If your credit allows you to open new accounts, this can benefit your credit score by lowering your utilization percentage, or the amount of your total credit you are using. You want your utilization to be under 30 percent in order to reflect well on your credit score. In general, you don’t want to use the new accounts, except under the circumstances below.

How to repair your credit
Finding a way to pay off high credit card balances can improve your credit score.

8. Do a balance transfer.

Using more than 30 percent of any given credit card or credit line can also negatively impact your credit rating. Balance transfers are a way to lower your utilization on any given account to 30 percent or less, which will raise your score within just a month or two. I know, because when I was able to pay off my credit cards all at once because of a windfall I received, my credit score jumped about 100 points in just one month and has remained at that level even as I have (temporarily) used some of the cards at under 30 percent utilization for rewards purposes.

9. Ask for limit increases.

Another way to get your utilization down to 30 percent or less is to ask for limit increases on the cards with more usage. You can do this by making a phone call to each credit card company. You may have to provide information about your income in order to get a limit increase, but your income may have increased since you first opened the card anyway, which will help to justify an increase.

10. Don’t close “old” accounts.

Credit reporting agencies give more weight to older accounts because they give more information about your payment history and show that you have been responsible with credit over a long period of time, so you never want to close old accounts–just file them away somewhere in case you ever need them, even if you don’t plan to use them in the near future.

11. Pay down balances.

If this were easy, your credit score would be great and you wouldn’t need this article. But there is almost no way to have a good credit score if your credit cards are maxed out, even if you are paying the minimum payments on time. You may need to get creative and find some ways to bring in extra cash to get your balances down to reasonable levels if you really want to impact your credit score positively.

You can go get a second job, or you can sell some of your extra stuff on sites like Swappa (for electronics) or eBay, which is a good option if you have a family that you want to see once in a while —- with a second job you will have little time for the fun things in life. Other at-home ways to earn extra cash include completing surveys with SSI (Opinion Outpost) or doing freelance gigs for Fiverr. Once you start paying extra to your creditors, you will begin to see your scores rise as the balances fall. And you will also have more money in your pocket and pay less in interest when you keep balances lower.

12. Pay newer, higher-interest accounts first.

Newer and higher-interest accounts drag your credit rating down the most, so be sure to pay them off as quickly as you can for the biggest boost. Don’t cancel the newer cards though, unless your total utilization is below 30 percent even without those accounts.

13. Become an authorized user.

If your spouse or someone else will let you become an authorized user on their existing credit card account, you will benefit from their credit history and your score will be positively impacted. Just be careful who you choose, because any late payments they make will also be reflected in your credit reports, too.

These steps will help you figure out how to repair your credit, with some taking effect quickly and others taking more time. Negative items can only stay on your account for 7 years with few exceptions (like student loans), so if you have older delinquencies that are about to come off, the impact has already begun to lessen.

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