So you missed a few payments, had a couple collections, and ended up with a charge-off. Or perhaps things got so bad that you had to file for bankruptcy. Or maybe you’re just one of those people who thinks that anything less than a perfect credit score is a crime.
So how do you rebuild your credit profile, and along with it, your credit score? You may have seen ads on TV, or signs on telephone polls on your drive to work that say “bad credit, we can help” or “rebuild your credit now”. You may also have considered using a credit counseling program.
But forgot about all those things and get back to the basics. There’s a good chance you know why your credit is shot. That’s probably why you’re here. So that’s the first step to resolving your credit woes. Knowing you have a problem and seeking help. The next step is to get your hands on a credit report.
It doesn’t matter if it’s a free credit report from AnnualCreditReport.com, a credit report from a declined credit application, or a credit monitoring program. Once you’ve got your hands on your credit report, it’s time to make sense of what went wrong and why.
Most of the major items are typically listed first on a credit report. You’ll see any tax liens, bankruptcies, and judgments first, followed by charge-offs and collections, then any other less severe derogatory accounts.
You need to comb through these items and determine if they are legitimate, and if so, why they’re reporting as negative items. You’ll also need to make sure nothing is reporting in error. Once you’ve assessed what should be there and what shouldn’t, it’s time to start tackling the problem.
Identify any accounts showing as derogatory that you feel are reporting in error. Once you’ve gathered a list, make a note of these and put them off to the side.
Remove Negative Items from Credit History
Use the link above to learn more about removing negative items manually from your credit history. If you are already enrolled in a credit monitoring program, simply login to the account and go to the “credit disputes” section to open any new disputes for items on your list.
Not everything can be removed from your credit history. A bankruptcy, foreclosure, or tax lien may stay on your credit report for years if you can’t prove it was reported in error. If that’s the case, just let it be and move on to other areas of your credit. There’s not always s a magic bullet to resolve all these issues.
Debt Validation
If you’re having trouble with debt collectors, look into debt validation as a means to protect yourself and get the monkey off your back. Debt validation can buy you more time and even excuse you from debt.
Pay off Existing High Credit Balances
Chances are if you have bad credit, you probably also have some accounts with large amounts of debt. Instead of applying for more credit, do your best to pay down any large balances to levels below 50% of the total credit line. Doing so will increase your overall available credit percentage and amount, which is one important factor in credit scoring.
If you’re in a money crunch stop spending. Do your best to budget as best you can and to limit your monthly liabilities. If you’re in credit disarray, you’re going to have to make sacrifices.
Maintain Existing Accounts
Work hard to maintain any credit accounts that you do still have open. Sure they may be riddled with late payments, but if you can salvage these accounts and get them back in the black, you won’t need to worry about filling out a new credit card application. This is especially important if your credit is so bad that new credit isn’t even an option for you.
Apply for a Secured Credit Card
If all else fails, consider applying for a secured credit card, which requires you to open an associated savings account which will act as the collateral for the credit card. If you use a secured card for a certain time period, being sure to make timely payments, you will likely gain the trust of the card issuer and get the chance to use a real credit card again.
How to Transfer Credit Card Balances with Bad Credit
There are options to transfer balances even if your credit has been knocked down and new issuers want nothing to do with you. Look at your current providers for balance transfer alternatives.
How to Raise Your Credit Score
Remember, credit building takes a lot of time. Time, in fact is one of the factors that goes into credit scoring, so big changes overnight are not likely. And keep in mind that getting added to other people’s tradelines will have little effect once the Fico score is updated later this year. So a bid to buy better credit may be a waste of time and money. And regardless, you won’t learn anything by trying to cheat the system, and will likely fall into the same traps that got you here in the first place.
