Credit repair is essential yet often overwhelming. Where do you start? Can you do it yourself? What exactly do you need to look for? It may seem surprising, especially considering all of the credit repair companies out there, but you can easily repair your credit on your own!
The first thing to do is look for discrepancies on your credit report. In 2013, 60 Minutes reported that studies show 25%-79% of credit reports contain errors. Errors to keep your eye out for can be as simple as incorrect personal information or as complicated as inaccurate payment history. It is also estimated that roughly 1 in 5 people obtain an annual copy of their credit report. If you do not obtain an annual copy, your chances of missing an error that is affecting your credit score will rise. Here are 5 common errors to look for.
Inaccurate personal information: The wrong middle initial or wrong address may be a sign that the credit bureau has confused you with somebody else with a similar name to yours.
Accounts that do not belong to you: An account that you do not recognize and/or do not recall opening, may be a sign that your identity has been stolen.
Duplicate accounts: Sometimes accounts can be entered in twice and, while you are not utilizing more credit than that account lists, this repeat information can raise your credit utilization ratio.
Closed accounts being reported as open: Old accounts that are still listed as open can raise your credit utilization ratio even though you’ve paid them off.
Inaccurate payment history: Sometimes payments do not get reported correctly and a payment that you made may be listed as late or missed despite you making the payment on time.
Continue to pay accounts with the most positive information is a top priority to-do when repairing your credit. If you have accounts in good standing, it would be ideal to keep those in good standing so that you do not have more negative information being added to your credit history. The more positive history you have, the better.
If you have debt that has not made it into collections, pay those debts down. Most lenders will work with you in installments which is ideal when you cannot pay the full debt upfront. Paying down these debts will also add good information to your report.
Resolving delinquencies that have been placed with collections is a must-do but it should also be the last items you mark off your list. Paying off collections in full will not improve your credit score. Even though paying off accounts sent to collections will not improve your score, good information will be added to report. This will help current and future lenders see that you are working to better your credit standing. Not paying off collections will continue to lower your credit score over time so be sure to not ignore these entirely.
When you are repairing your credit, keep in mind that closing accounts will not help you. In fact, closing accounts can actually hurt you instead. When you close an account, whether it is in good or bad standing, all of the information will remain on your credit report. Opening and closing accounts reflect negatively to lenders so it is ideal to keep your accounts open (that are actually necessary), especially if they have been open for a good length of time with a history of positive information. If you have an account that has been open for a length of time and is currently reflecting negatively, work on bringing that account to good standing instead of focusing on a more recently opened account.
Unfortunately, many credit repair companies are often untrustworthy and tend to make promises that they cannot fulfill. If you do choose to utilize a credit repair service, here are ways to spot a dishonest company.
- Charge upfront fees.
- Claim affiliation with the government or credit bureaus.
- Promise a specific score.
- Promise to delete accurate information.
- Encourage you to create a new credit identity.
- Discourage you to contact the credit bureaus directly.
- Ask you to waive your rights under the Credit Repair Organization Act.
Even though federal law prohibits credit repair companies from performing these actions, most consumers are unaware of these laws and do not realize that these companies are taking advantage of them until it is too late.
Whether you decide to take on repairing your credit yourself or to work with a credit repair company, the absolute best way to keep hold of your improvements and quickly identify errors is to pull your annual credit report.
If you would like assistance and a free consultation to discuss your current situation, please give us a call @ (720) 305-0757.