5 Ways to Speed Up Recovery from a Bad Credit
Suffering with a bad credit score can make your life miserable. Many lending institutions will not want to work with you, it can make renting impossible in a lot of situations, it can raise your car insurance rates and many employers view low credit scores as a key reason why they will not hire you.
Fortunately, you can do many things to rapidly improve your credit score. Here are a few tips to get you started.
Get Your Three Major Credit Reports
In order to get your credit back on track, you must start by getting a copy of your three major credit reports. These are the credit reports generated by Equifax, Experion and Transunion.
These three reports will help you identify what is reporting negatively to your credit, or expose how thin your credit report is.
Correcting a Thin File
A thin file is a credit situation where the major credit reporting agencies do not have enough information on your credit history to provide you with a credit score.
An easy way to start remedying this situation is to apply for credit cards and use them wisely. Getting a couple credit card accounts open in your name, paying them off regularly, and never being late on your payments, will cause the credit card companies to report positively to the credit reporting agencies.
This will make your credit score rapidly move upwards in just a few short months. As a rule, try to never carry a balance on any line of credit that exceeds 30-percent of that credit lines limit. This should also help to prevent any serious dips in your credit score.
Addressing Negative Reporting
The most common reason for bad credit is negative reporting. When you do not pay bills on time or skip out on paying back credit extended to you, companies will report negatively about you to the major credit agencies.
You may think it will do your credit good if you just start paying everything off, but this is not always true. In fact, this can often do more harm than good to your credit score: as counter intuitive as that might seem.
The negative reports that are newest on your credit report will be the ones that do the most damage. The older items showing up on your report will carry less weight—especially if they are approaching the fall off date.
But, sometimes rapid improvements in your credit score can result from addressing a lot of low amount items at once. Fortunately, with each negative item you get off your report, the better and faster your credit score should improve.
Disputing Items on Your Credit Report
If a company has put you through collections or charged off debt you owed them, this can seriously damage your credit score. Fortunately, you have the right to send companies reporting to your credit negatively debt validation and debt verification letters.
The type of letter you send by certified mail depends on whether it is the primary company you owe the debt to or a collections agency that purchased the debt
Sending one of these letters gives the company reporting negatively 30 days to demonstrate that you owe them the debt in question.
If they cannot produce proof that you owe the debt in question, then by law they must stop reporting negatively to the three major credit reporting agencies about you.
If they do not, you can pursue the matter with legal action; otherwise, ceasing their negative reporting will rapidly improve your credit situation. Using this method could make it possible for you to acquire the auto financing you have been trying to get to help you get into a new car.
Pay for Deletion
If you do not want to wait seven years for particular items to drop off of your credit report, you can always attempt to contact a creditor or collection agency with a pay for deletion offer.
A pay for deletion letter is one where you offer to pay an amount equal to or less than the amount owed. The party you send the pay for deletion letter to, by certified mail, may choose to agree to your offer or reject it.
Generally, if you make a reasonable offer, a collector will likely know this is the most money they are ever going to get out of you despite all their collection efforts; consequently, there is a good chance they will say yes.
In turn, once they have received payment, the one collecting the debt is obligated by the terms of the pay for deletion letter to cease and desist from reporting negatively to your credit report, and they should also agree that by accepting this offer that it constitutes a proper settlement of the debt in question without any further attempts to collect or transfer the difference to a third party collector.
Once the negative report is cleared from your credit report, this can help to rapidly raise your credit score as well.
Remember, never pay anything off unless you know that by doing so you have some guarantee that your credit score will improve as a result; otherwise, it just is not worth messing with such items on your credit report unless you think you are at risk of facing legal action from a creditor or collections agency.
Conclusion
Your credit score is one of the primary keys to your financial health. Next to your income, your credit score and a good credit report can truly make a big difference in your ability to open relationships with new creditors who want your business.
As you correct items on your three major credit reports, the increases to your credit score will make you far more attractive to companies looking to lend you money.
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Category: Debt
