10/16/2017
Help me! My credit is a mess
So what if your credit is a disaster? Is there even any hope at all? The answer is YES! I am not promising you can fix it over night and any place that promises this is A. Lying and B. Trying to make money off you. I do not recommend anyone paying a credit repair place for several reasons. First of all, all they do is a mass dispute campaign and hope some of the items come off because the credit bureau is overwhelmed by requests. You can dispute your own credit for free (or just the cost of a postage stamp) and secondly debts that are valid will find their way back on your credit report, even if it looks like the agency got it removed. What happens is when they file the dispute if there no response, the item comes off temporarily; however if they responds later or if they continue to report it, the items ends right back on your credit report. So yu can pay hundreds of dollars and end up in the same spot.I will give you a task list of what can be done to actually fix your credit:
1. Pull your credit report at either www.annualcreditreport.com or www.creditkarma,com. Both are free and will show you what is on your credit. Have a pen and/or highlighter ready.
2. Look through each item and see if you agree with what is on there. If you find anything that does not belong to you highlight or put a star by it. Look at any Public Records, such as Civil Judgments or Tax Liens. Judgments are valid longer but sometimes will fall off report; however Tax Liens will show as long as they remain unpaid. They will fall off 7 years AFTER they are paid, so they can haunt you a long time.
3. Dispute any errors, including wrong addresses, accounts that are not yours and anything older than 7 years old.
4. For debts that are valid make a list from newest to oldest accounts. The newer accounts affect your score more than old stuff, plus the statute of limitations in your state may be up and no longer collectible. (See table https://www.thebalance.com/state-by-state-list-of-statute-of-limitations-on-debt-960881).
5. For any accounts that are not in collections, whether they are up to date or past due, make those a priority to either get them up to date or just continue to pay them on time. 35% of your credit score can be repaired by making on time payments.
6. Bring down balances on any credit cards that are over 1/3 of the limit. For example if you have a card with $1,000 limit, the most you want to owe is about $300. So put away the cards and bring down the balances as quickly as you can and still are able to pay your other bills. The goal is to be able to pay them off monthly and avoid interest if you can, even if it takes a while. This accounts for 30% of your credit score, so by doing #5 & #6 only you will make a huge step in fixing your credit.
7. Don’t apply for any new credit while working on your credit. New inquiries can hurt your score. Do not apply for any cards to get a discount! You can monitor your score through www.creditkarma.com or many credit cards also have that benefit now for free.
8. If you are planning to buy a house, mortgage companies want collections paid off, so either create a plan or put them into a non-profit Debt Management Program by calling NFCC at 800-388-2227. Be aware sometimes by having new activity on the collection is can actually temporarily decrease your score. Letting things fall off that are near the 7 years is also a strategy because it may no longer be collectible any longer. (Note * Most local utility companies require you to pay off an old balance to obtain service ever again, even if it no longer shows on your credit)
9. Medical collections typically do not upset lenders as much as other types of debt, due to the fact not everyone has the greatest health insurance (or any at all). Check with your lender if medical collections are a problem if they show.
10. Avoid high risk lenders such as loan places that charge high interest or require you to use your possessions as collateral, such as One Main Financial (formerly Citifinancial). A loan from one of those places are a red flag to a lender that you were desperate and willing to take any conditions. Be patient and let your credit heal so you will eventually qualify at a local bank or credit union (my preference).
11. Don’t close accounts you have had a long time when you are trying to qualify for a loan. If you don;t want the account, wait until your are done qualifying for the loan and then close it. Basically hold your breath and leave everything the same or better during that process.
Really that’s it and the 2 most important things are paying what you already have ON TIME and owing 1/3 of less on credit cards. If you do those 2 things, you will bring your credit score up quickly. Remember to be patient and forgive yourself for past dumb mistakes. Time heals all including credit report and age gives us wisdom.
