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3 Quick Tips on Fixing a Bad Credit History

Updated on March 10, 2015

First a mortgage meltdown…then a financial crisis, which as we all know preceded one of the greatest economic downturns since the Great Depression of the 1930s…now what? Perhaps in an odd twist of faith, the U.S. economy now appears to be improving: the macroeconomic trifecta in the stock, energy and real estate markets have all been on a bullish roll lately, further burnishing the notion that the worse of the “Great Recession of 2008-2010” (as its officially titled) has finally run its course. Tantamount to the “Great Financial Storm,” the “Great Recession” left a lot of financial debris in its aftermath. So much so that the total U.S. credit card debt now appears to be approaching $800 billion, according to the Federal Reserve Bank of New York. At this particular economic juncture, especially for the millions of Americans now suffering from tarnished credit histories, a little bit of personal financial reconstruction seems optimal. Indeed, if you happen to be one of those millions, the following list below represents three quick tips you should consider to improve your personal credit histories, FICO scores and any past financial blunders:

Tip#1: Setting up a Budget…

Trivial as it may seem, the very first step to improving your overall credit profile, begins and ends with planning. A personal budget is really nothing to be ashamed of. What’s more shameful, especially in a post recessionary environment, is the idea of working without one.

Step1: “Plan your budget, budget your plan.” Despite its initial difficulty, a well-written budget depicts a more accurate account of where your money is actually going, what kind of expenditures and incomes exist, and how much you’ll have left over to pay down current debts? Failure to take this critical step will result in eventual late payments, increasing the odds of further damaging your FICO scores.

Step2: “Think it, Write it.” When getting your personal finances in order, the next thing you’ll certainly want to do is take the necessary time to thoroughly write down your budget, making a detailed list of all your expenses, and income sources. If writing all the information down appears to be a bit overwhelming, there are several options available. Today, there exists a great number of household budget spreadsheet available free for download from a variety of different financial websites. Don’t like the idea of working with legal pads or a spread sheet? Don’t worry: Taking command of your personal finances has gotten a lot more sophisticated with the advent of the internet, which happens to be the premier venue for showcasing a number of great budgeting websites such as Mvelops, ClearCheckbook and Mint.com, which is regarded as a major player among web-based financial management tools.

Tip#2: Identifying Credit Report Errors…

Equifax, Experian and Transunion, the big three credit bureaus, have entered into the ubiquity of mainstream America’s financial culture. Put simply, credit reporting agencies are in the business of data collecting. Thus, in the process of collecting all this data (mainly, from the thousands of lending institutions who extend credit) credit reporting errors indeed has been known to happen. For this very same reason, checking ones credit can’t be overly stressed: “credit reports contains errors, credit reports contain errors and credit reports contain errors.” No, this isn’t a new hip song about the credit reporting industry in the likes of freecreditreport.com. Rather, what it does represent, perhaps, is a constant reminder of the overall significance of individual credit report review, which entails searching for erroneous information in the form of late payments, charge-offs, collections and fraud accounts. Still further, there are a great number of credit reports which contain misinformation such as wrong names, address and employment, all of which can have adverse effects to your credit histories.

Tip#3: Disputing Negative Accounts…

Under the Fair Credit Reporting Act (FCRA), a federal law that regulates the collection, dissemination, and use of consumer information, consumers are afforded the right to dispute erroneous or obsolete items on their credit reports. As mandated by the FCRA, if a consumer sends a credit bureau a letter stating his or her objection with a negative item on his or her credit report, the bureaus must investigate that claim, normally within a given timeframe of 30-45 days. Still yet, it’s the responsibility of the creditor furnishing the erroneous or obsolete information to prove it true…and if they cannot? Then, the credit bureaus must remove the items from your credit histories.

The economic downturn appears to have forever altered the daily life of most American families. Case in point: Prior to the 2008-2010 Financial Crisis, the average American family, bedazzled by the allure of financial hubris, used this idea of leverage (namely, the notion of borrowed funds via excessive credit cards usage), to run up a consumer debt bill so large that the 1 out of 3 American families are now burden with excessive debt. Perhaps hit with a zest of economic humility, Americans now seem to be more enamored with the idea of deleveraging—i.e., spending less, paying down credit card debt and overhauling their personal credit histories.

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    • MarloByDesign profile image

      MarloByDesign 3 years ago from United States

      Very informative Hub! Rated 'Useful'. I recently heard Clark Howard talking about Mint.com and I definitely have to check it out!

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