Do It Yourself Credit Repair
I consider my credit
Good credit is one of the most important things we can have as an adult. What do you do to repair your credit, or build it? I've been through the ringer with my credit score. I had a low credit score because of limited credit history.
Having gone through multiple hardships over the past few years, job loss, eviction and vehicle repossession. My credit took a really hard hit. Struggling does not even begin to cover it. I decided I had to get something done so that I could obtain credit in the future. Who knows when some other unforeseen event created another hardship for my family.
I thought I would share the fruits of my research and digging my family out of debt. How I was able to raise the bad credit scores that resulted from said debts. As a result of my hard work I now have two major credit cards with a $400.00 credit line each. As well as a $950.00 department store line of credit.
Repairing my credit may not seem like much to many people. Although it is a great achievement since I am 33 and have never had a single credit card in my name. I never thought about not pursuing credit affecting my ability to get it later in life. Take it from me not having a long "credit profile" (length of credit) is a very hard obstacle to overcome. Credit repair can be simple for some, and harder for others.
I wish I had learned about the importance of credit, and credit scores sooner in life. I would have pursued some form of revolving credit rather than avoiding obtaining credit cards. I thought avoiding them would be beneficial, I was wrong. As a result of my credit being limited with no revolving accounts, when we purchased our vehicle we had a horrible interest rate of 23.4%. The saddest part is that I originally did not have bad credit, just no credit history. Both can be equally concerning when you need to purchase a home, or a car.
Do Not Use Debt Repair Specialists
You CAN repair your credit by yourself! I did extensive research of so called 'Debt repair specialists'. While the ads are very tempting, you can do everything they can. Saving anywhere from $99 and up on the monthly fees the specialists charge. I have seen the fee as high as $300 a month!
If you can afford even the $99 a month, you can start to pay off your debts yourself. In most cases these fees are charged as soon as you sign up! Ask yourself - why? That is like, paying for your groceries and leaving them at the store! You never pay a mechanic before he actually fixes your car either. Use a little common sense when you start to repair your credit.
You should not pay for this service in advance period. When you have received the service and see proof that it has worked, then and only then should you be billed for it. Often times these specialists are not even licensed to operate in your specific state. So you are paying for something that you will never benefit from.
Now I would like to touch on what they do. A debt repair specialist will negotiate with your creditors. They often get creditors and collection agencies to agree to settle your debt for less than the deficient balance.
The problem with this is, you pay the firm a monthly fee. As well as making additional payments to them that go toward your debt. The payments going to your debts are often held until they build a large amount of money. In order to pay off the debts at once or in a lump sum. This means until the needed amount is built up you are still getting hit with late payments. Causing your credit score to continue to suffer.
While they will ultimately be paying off your debts in the end. Your credit score will still suffer with each late payment reported. Even if the debt is removed. It will take time to get your score back up to snuff.
So by all means if you want to spend the $99 and up a month then go for it. I recommend saving the fee because there is nothing they can do that you can't! You can apply what the fee would cost towards your debt.
Credit Score Repair
You can absolutely negotiate to settle your credit debts for less than the balanced owed. You can also negotiate at the same time to have these items deleted off of all three major credit reports!
This is where having a copy of your credit report is key! Credit reports list all accounts and collections. First check your states 'Statue of limitations' for debt collection. This will tell you how long your debts remain reported till they 'fall off' your report. Focus on the newer debts as they will have a higher impact on your current score.
Never deal with debt collectors by phone. You must send everything by mail. Preferably Certified signature required with return receipt. This way you can document your attempts to settle the debts. If you do not recognize an account send a validation letter. A validation letter is asking for proof that you owe the debt. Take note that a validation letter can start the statue of limitations over (that is why starting with newer debt is best). This gives the debt collector 30 days to "validate" the debt. If they fail to validate you can submit a dispute with the bureaus for its removal. Always keep a copy of the validation letter as well as your returned receipt for verification. Send copies along with your dispute to all three credit bureaus.
If the debt is yours, start negotiating. Never pay anything without getting a "pay for delete" agreement. Even a collection marked as "paid" is still a derogatory mark on credit reports. Often times they will decline your request, just keep trying. Keep your letter simple and polite. There are many sample letters on the web.
The key elements to your letter need to be how much you are willing to settle the debt for in exchange for it being removed from ALL credit bureaus. You can also add that if they do not respond in 15-30 days (up to you) that you will retract the offer. It is very important you include, "if you agree to accept my offer please send a legal document agreeing to my terms and bound by my state laws".
Never sign by hand! Always type your name! They can use that signature in erroneous ways. Always include the date it was reported and the account number listed on the credit reports. I do not advise using your birthday or social in any correspondence. If they can't find it based on the information on your credit report that is their problem.
Make sure prior to paying that you have the agreement in writing. There really is no incentive to pay if you cannot get it deleted, the collections companies know this and usually will agree to these terms. If the terms have been agreed to, great! It can take up to 45 days for items to be deleted from reports. If you find it has went beyond and still showing up then start the dispute with all three major credit bureaus. It will take a while for the credit bureaus to investigate your information but they will inform you of the deletion and in most cases send you an updated copy of your credit report.
While I still have an auto repossession to deal with. I have managed to open two revolving accounts and gain over 60 points to my credit scores. I have only been working on two collections at a time since it can be time consuming to compose the letters and negotiate.
Use credit responsibly! I have one of my cards linked to my Netflix account and use the other to pay my utilities, and always pay the balance in full prior to the due date to avoid interest charges. Spending money that I do not have the ability to pay back is not an option!
Reading books on credit repair or understanding credit can really boost your credit knowledge. I have ready many books, and they all really helped me gain an understanding of the credit systems. Time well spent when it comes to improving your credit scores and building a credit portfolio!
Please make sure you always read EVERY bit of information linked with applying for credit cards to reveal hidden fees and charges. I often find in reviews for credit cards that people complain about charges and fees. Yet they failed to read all the fine print.
Many websites offer free credit monitoring. Keep in mind the scores they show are for educational purposes and more than likely are not 100% accurate.
These sites are a good asset though. They will update any knew activity that has been added to your reports. This is essential in catching possible identity theft, or catching inaccurate information. Many credit cards will also offer a monitoring service for free.
I suggest taking advantage of the free monitoring services as an easy reference to what has changed and to see improvements to your reports.
Credit Monitoring Services
Get the score that lenders use most. This is a paid service, I use the forums as they are very helpful I do not pay for the service though. I do not advocate paying for your scores as there are hundreds of score calculations depending on the lender.
- Annual Credit Report.com - Home Page
You can order your free credit reports once per year to help you monitor and repair any issues on your credit. It is a must if you are interested in repairing your own credit!
- Better Credit for All - Get Started for Free at Credit.com
Get a Truly Free Credit Score & Personalized Advice From Our Credit Experts. Learn How To Better Manage Your Credit & Which Credit Products Are Best For You. This really offers some insight into your finances and ways to improve!
- Free Credit Report & Free Credit Score. No Credit Card Required.
Instantly receive your free credit score and free credit report online. Free credit tools to track and optimize your credit score. No credit card needed & no hidden fees. Keep in mind these are educational scores only and not actual scores.
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Alternate Credit Reporting
It is frustrating to always pay your bills, utilities and rent on time and still suffer low credit scores. Things are starting to look up for those in this position.
If you are in good standing with your landlord you can ask them to report to the credit bureaus on your behalf. If you landlord only has a few rental properties they may be reluctant to do so, there are some fees involved. You can offer to pay the fees, assuming you can afford to do so. Or you can look into RENTTRACK, a service that allows you to pay your rent online.
This option will require you to sign up, and involve your landlord as well. RENTTRACK also shows you credit scores, and helps to build your credit. I suggest looking into it further. Who is not paying rent? This could really benefit your scores. I have been paying rent since I graduated high school - my score would have been awesome, had my rent payments been reported.
Another great addition to alternative credit reporting is PRBC. PRBC tracks bill payments, Netflix, Amazon and utilities etc. They report your good spending habits and many lenders will use their credit report when you are looking to be financed. This is a wonderful way to build your credit in addition to the three major bureaus. If your three major scores are not what they need to be for financing you may still get approved when taking your PRBC report that shows all your on time payments.
Never underestimate the power of a secured loan in building your credit. A secured loan is a loan taken against monies in a savings, a car title or property. If you default the bank takes whatever was "secured" when the loan was initiated.
If you know you can afford a $500-$5,000 loan, but do not have the credit score to obtain it then a secured loan maybe right for you. Always make sure you have the ability to pay back the loan, otherwise you will lose whatever monies or items you secured it with.
Small loans are a great way to start in building your credit. Even if you take out a small $500-$1,000 loan and immediately put it in the bank and do not touch it, it can help build credit. You can then set up direct withdraw of the loan payment each month(if you did not already) using the actual money you were loaned and not touching your budget.