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How to Repair Poor or Badly Damaged Credit in 7 Simple Steps

Written by prositesfinancialJan 7 • 4 minute read

If you have managed to damage your credit score for whatever reason, it is definitely in your best interest to repair it as soon as possible in order to maximize both your opportunities and financial savings.

Why Your Credit Score Matters And Why You Should Fix It:

Having a bad credit score can affect your ability to get insurance, credit cards, and loans, as well as the interest rates you will pay on each of these items and other forms of borrowing. It can also affect the premiums you pay on your car insurance, as well as your ability to get insurance and to rent a residence. Rental property owners and management companies will usually check your credit when you apply to rent from them, and a poor credit score can push you further down the applicant list or cause them to deny your application.

If you are getting new utility services turned on at a new residence, the utility companies will also run your credit to determine whether or not to make you put down a security deposit, and if so, how much it should be.

Depending on which industry you work in and what sort of job you are applying for, a potential employer may run your credit score to see how you handle your personal finances before they offer you a job.

You Can Repair Your Credit Yourself

While you may have seen promotions online or on TV for various credit repair services offering to solve all of your credit score woes for you, you definitely do not need to use any of these services, and they are in reality not able to do anything for you that you cannot do for yourself.

These services exist to make money for themselves first and foremost, so by fixing your credit for yourself you can save quite a bit of money and learn a thing or two in the process. This will also save you the hassle of digging through countless reviews searching for a company that you can trust.

So now that we know you can indeed fix your own credit, let’s explore how exactly to go about it:

1. Get an updated copy of your credit score.

The first step in repairing your credit is to gather an accurate picture of the problem by requesting an updated copy of your full credit report. There are free websites online where you can obtain this report in seconds. By law, you are entitled to a free credit report from each of the 3 main credit reporting bureaus. You can get a copy of your annual credit report from www.annualcreditreport.com.

2. Other Credit Report Options

If you have had an application for credit declined due to one or more items on your credit report, you are also entitled to receive a free copy of the report. You can also get a free copy of your credit report if you are receiving assistance from the government. Another situation where you are entitled to a free credit report is if you are currently unemployed, but plan to search for a new form of employment soon. Further, victims of identity theft and fraud are also allowed a free copy of their credit report to help them assess the damages. Depending on which state you live in, your state might also have a law that grants you access to a second free credit report each year on top of all of these other options. You can order these credit reports directly via each respective credit reporting bureau.

3. Once you receive your credit reports, check them carefully for errors.

The first thing to look for on your credit reports are any errors that may have been made. Dealing with legitimate issues is enough of a struggle, so the last thing you need is mistakes or inaccurate reporting damaging your credit score!

If you have been using credit for a long time, there is a chance your credit report could be several pages long and very detailed. It will contain a comprehensive history of your interaction with debt and repayment and any bankruptcy filings as well as each instance where you applied for credit and were accepted or denied. The report will also contain personally identifiable information, so be sure to keep it confidential and store it in a safe and secure place. 

4. Dispute any incorrect or unverifiable information on your credit report.

It is important that you dispute any information on your credit report that is incorrect or unverifiable. There are a few different ways to do this, ranging from online to over the phone to sending them in physically by mail. So which way is the best option to dispute an issue with the credit report?

Filing a dispute online is definitely the easiest and most convenient option, but has some downsides. It doesn’t leave the same form of paper trail that a physically mailed in dispute does, and it is also a bit more difficult to provide proof in some cases.

For this reason, mailing in a dispute is generally recommended as the best way to file one.

5. Pay off any past due balances.

The next step after you have filed any necessary disputes with the credit bureaus is to pay off any past due balances you may have outstanding. Obviously, you most likely don’t have a whole lot of money to put toward this, but it is important to prioritize paying any past due balances and getting your accounts into good standing.

6. Lower your total balances.

Once all of your balances are under control and in good standing, the next step is to lower your overall credit balance and your individual credit balances, to get them well below your credit limit. Finally, pay off any credit accounts that have been sent to collections or charged off. Once you have done these things, it is important to stay on top of your payments by making each payment on time and keeping your accounts in good standing.

7. Apply for new credit.

Once your balances are under control and your accounts have been good standing for several months to a year, it is time to look for new credit. You can try using a secured credit card with a deposit, or a store credit card as a first option when applying for new credit after a period of poor credit history. Try not to apply for more than one or two though, as having too many applications for credit (credit inquiries) on your report can harm your credit score. Finally, maintain the new credit accounts in good standing and watch your credit score continue to recover and climb to new heights.

Obviously, there is so much more that could be said about this topic, as it is very nuanced and involved, but we hope this brief overview of how to repair your credit proves helpful to you and saves you some money too! If you have any other suggestions for others on how to repair their credit score, or if you have repaired your own credit successfully, feel free to share your experiences and tips with others in the comments below!

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