5/1/2013 8:15 PM ET|
11 tips to rebuild your credit
If your credit rating isn't as robust as you'd like it to be, bring it along with these steps.
Looking for tips to build your credit? Here’s a slew of them to help you get your credit back on track.
Set a date night with your credit. Think of it as your monthly check-up, or weigh in. Or add it to your to-do list when you pay your bills. Just be sure to take a few minutes each month to review your credit scores, monitor your progress, and set your goals for the coming month.
Your credit reports and scores are generated when they are requested, so as soon as negative information is no longer reported — or positive information is reported — your scores can change.
Don’t overlook the obvious. When you are trying to fix your credit, you may find yourself focusing on the “big” stuff like judgments, charge-offs or other negative information. But the personal information on your credit reports is also important.
A misspelling of your name, or an address you’ve never lived at, could indicate your credit information is getting mixed up with someone else’s. So take errors here as seriously as any other mistakes you may find on your credit reports.
Mark your calendar. The Fair Credit Reporting Act addresses how long negative information can remain on your credit reports. There are limits on how long negative information can be reported:
- Late payments: 7 years from the date the payment was late
- Collection accounts: 7.5 years from the date of delinquency on the original debt (leading up to collection)
- Charge-offs: 7 years from the date charged off
- Tax liens: 7 years after they are paid or satisfied
- Judgments: 7 years from the date entered by the court if paid, possibly longer if unpaid
- Repossession: 7 years from the date the repo occurred
- Bankruptcy: 10 years from the date filed (Chapter 13 cases will be removed 7 years from the date of filing)
You typically don’t have to request that the credit reporting agencies stop reporting negative information that is too old; they do that automatically. But it’s still a good idea to check your credit reports around 30 – 60 days after this type of information is scheduled to come off your reports to make sure it’s gone.
Watch out for credit report double jeopardy. Collection accounts that go unpaid may be sold from one collection agency to another. When that happens, both the number of collection accounts and the amount of debt you owe can be inflated. One of our readers founds that four unpaid credit card debts turned into fourteen collection accounts on her credit reports! It may take time to unravel which are legitimate, but when you do, dispute all but the most recent accounts as duplicates.
Don’t be afraid to bargain with debt collectors. As far as your credit scores are concerned, it doesn’t make much of a difference whether you pay a collection account in full or settle the balance for less than the full amount. Just make sure that you get any deals in writing. Paying a collection account won’t immediately change your scores, but it will mean you can stop worrying about that debt and focus on other financial goals.
Kiss your tax lien goodbye. If there’s one great tip to build your credit, this one is it: If you pay or settle a tax debt that resulted in a tax lien on your credit reports, you may be able to get that lien removed completely from your reports. The same may apply if you enter into an installment agreement with the IRS. Find out if you qualify and if you do, your credit scores may improve significantly when the tax lien is removed.
Accentuate the positive. After running into credit problems, you may be afraid to jump in the water and use credit again. While you certainly want to be cautious and avoid getting in over your head again, getting credit is going to be essential to building your scores again. Recent, positive credit information can help your credit scores, and can make a big difference as you fix your credit.
Get a secured card. These cards should be easy to get, even with damaged credit because you put up a security deposit for the card. (Manage the account properly and you will get your money back when you close the account.) If you choose a card that is reported to all three major credit reporting agencies, you’ll establish a new positive credit reference.
Don’t max out a credit card. I recently talked with someone who is trying to restore his credit after a short sale and tax liens sent his scores plummeting. He opened a secured card with a $500 limit and was using it as often as possible, in hopes that would help his credit. What he didn’t realize is that his credit report listed a $400 balance on a card with a $500 limit. That made it look like he was maxxing out a card, which wasn’t helping his scores. Ideally, you want to use no more than 10 – 25% or so of the available credit on an individual card to score well for this factor.
Dispute mistakes the right way. When you review your credit reports, you may find information that is wrong. If the mistake is a serious one, it’s a good idea to send a letter rather than filing an online dispute. You’ll need to challenge the error with each of the major credit reporting agencies that is reporting the error, since they don’t share information with each other. And if you ask a lender to correct information that it is supplying to the credit reporting agencies.
Be extra careful this time around. One late payment can mean a big drop in your credit scores, and that’s not what you need if you are trying to fix your credit. Set bills up on autopay or set up automatic payment reminders by email and/or text message so you don’t forget a bill.
More from Credit.com:
VIDEO ON MSN MONEY
The Credit Bureaus!
Who is the largest reseller of our most confidential information?
The Credit Bureaus!
Who decides what is sold about you and to whom?
The Credit Bureaus!
How do they get away with this?
Because we let them, and like Identity Theft, it doesn't concern us until it is too late!
That's YOU if you enslave yourself to the bankers.
Mortgage lending at a record lowest ever in the history of the US for private citizens. Mortgage lending for Corporations is at the highest level ever in the history of the US. Then corporations in turn rent these houses back for 3 times what the mortgage payment would have been. Is it getting clearer?? Nothing happens by accident.
Frank Dodd: Cypress was about these laws which basically say that the money you deposit in the bank is now considered as stock in that bank. Then they can take your money and invest it in the stock market bringing down high returns while you take the risk. if the bank fails from poor investing you lose your stock/money.
Glass Stiegel protected us for over 60 years from this abuse. We must reinstate it as soon as possible. If the stock market collapses (seems that this has happened a time or two) then not only do we lose our 401K's but also our savings. This is the real reason for Cyprus, in fact several countries in Europe are looking at Glass Stiegel laws for themselves. Call your congressman, both state and federal.
I look forward to you pumping my gas. Yeah you. CLOWN.
And there it is people.
Pay for what you can afford to buy and be honest with yourself.
Tell the sleezebag banker- GO TO HELL!!!
Pay real attention when you get your statement., for credit card charges. Check the interest rate and fees for being late with a payment.
Credit card is having the data processing persons hold your payment so it will be late and and they can charge fees and interest. When you call to complain the Customer Service rep says"it is not our fault you are late with the payment" We do not hold payments. They will not recognize the Post Office date Stamp. I wrote the President of Bankcorp with my complaint and the response was from his "clerk" and rude, and refused to make the adjustments to my account. I was not late, the payment had 7 days to the due date for posting, but the bank held the payment so it was posted late.
I plan to file a complaint with Attorney Generals office/Consumer Protection Division. Banks will do anything to make money.
There are some truths to this and some very broad suggestions. Coming from someone who has had great credit, got my @ss handed to me and taken out by the knees when the market tanked and has begun rebuilding my credit I can tell you specifics and falacies coming from experience.
For starters a 'good mix' of credit. A good mix of credit is 2 installent loans: a loan that when its paid off is paid off and cannot be used again i.e. a car loan. And 2 revolving tradelines: a tradeline that can be used, paid off and reused again. i.e. credit cards and USE THEM.
A common mistake is people get a credit card and hold on to it and do nothing. Thats exactly what that card will do to your score- nothing. Maybe even hurt it.
Establishing credit is all about establishing positive transactional history. Use the card for a tank of gas or groceries and pay it off. Month after month and keep your balance at 30% or less of the available credit. As an example: you have $100 available credit - dont spend more than 30 bucks at a time.
Get a secured line of credit. Walk into your bank with $500-1000 or whatever you can afford and let them know you want a secured loan against your money. Theres no risk to them because they have your money. Make payments on it until its paid off. Establishing or building credit will cost you money. Theres simply no way around it.
Have a significant other, friend or family member with good credit? Ask them for a favor! Ask them to add you on to a credit card that has positive transactional history as an 'authorized user'. Whatever credit history they have established on their credit will report to yours as if you've had the card as long as they have and your credit score goes UP virtually overnight and they dont ever have to give you a card!
If you must close out an account after its been paid off, specify to the creditor that it's listed on all 3 bureaus as 'closed by consumer'. If you don't you run the risk that it's listed as closed by 'grantor'. Anyone looking at your credit in the future will want to know why was it closed by the grantor? Were they late? Slow pays? Charge off?
Think like a creditor. If you were taken out by the knees and are on track or want to be to establishing credit LET THEM KNOW. Write a good faith letter explaining why your credit took a dip in the last year or however long!
A credit decision sadly sometimes comes down to how someone aka the underwriter feels on that particular day. If they see a common sense underwriting scenario they're more likely to grant credit. Example: I see the borrower went through a divorce and in the last 6 months has made his payments on time and that turmoil in his life seems to be over. Without a letter all the u.w sees is a bunch of bad credit without explanation. Was this guy lazy? unemployed? etc. etc. etc.
Challenge bad credit. You're entitled to by law! Look for discrepancies. Want to stop a credit collector? Did you know you can send them a cease and desist letter? Ask them to send you a letter of validity. Watch how fast they stop calling.
Get a secured credit card like First premier bank. Won't be much for credit like $250 bucks but its a start to restablishing your credit and if like everything else in life, if you're simply too busy- hire someone to help you clean up your credit. There are a ton of reputable companies out there and the one i've selected after my due diligence was U.S. Credit Consulation. Google them. You'll appreciate their candor and efficency. They're easy and cheap and will save you literally thousands in interest. It will pay for itself and quickly.
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