Credit History Repair: Six Tips for the Do-It-Yourselfer

In tough economic times, many people have difficulty obtaining credit or paying their existing bills and credit histories can suffer.  Many companies will promise to help rebuild or repair credit but can charge fees for their service.  Some of the offers may even be fraudulent.  Often times, it can be just as easy to work on repairing your credit history yourself.  Here are several useful tips for anyone wishing to repair credit on their own.

You cannot possibly begin to repair your credit without knowing what is being said about you.  That is why it is vital to obtain your own credit report.  There are 3 top credit reporting bureaus; Equifax, Experian, and TransUnion.  You should receive a credit report from each one since the information may differ.  You are entitled to a free credit report every 12 months from each of these companies, and you should get a report and monitor it regularly.

You should look at your credit report to make sure it is your credit.  When I went to obtain my first mortgage, some of my father’s loans were on my report since we share first and last names but have different middle names.  You also want to verify the accuracy of the information that is yours.  Make sure the credit limits are recorded properly and that all payments have been credited appropriately.

A 2004 study found that 25 percent of credit reports had a serious error that might cause someone to be denied credit.  If you find any of these inaccuracies on your credit report, be sure to write the credit agencies and dispute your findings.  Keep records of all your correspondence including all phone calls.  You may also need to contact the creditor via certified mail and send a copy to the credit bureau.  Document everything very well in case you end up in court.

If you don’t find any errors and have bad credit as a result of your own financial decisions, then it is time to take a look at your financial life.  First and foremost, you need to stop living beyond your means.  This may mean some difficult decisions including selling assets, moving in with friends or family, or getting a second job to make ends meet.

Next, you need to start paying your creditors on time each and every month for a couple reasons.  First, you can establish a history of reliable payments that will help your credit score.  Second, you can decrease the outstanding balances on your accounts and not have all your credit “maxed out”.  This will make you look less desperate financially and demonstrate responsibility.

Paying down credit cards should provide more “bang for the buck” when it comes to improving your credit score.  So if you do get your monthly budget under control and apply extra money against your debt, pay off unsecured credit card debt first.  This usually carries the highest interest rate anyway so that’s good.  Furthermore, you don’t want to close accounts to try and improve your score.  This will increase the amount of available credit on which you carry a balance.  Just cut up the cards instead.

Repairing a credit history may be as simple as making a few calls or writing a letter or may involve a lot of time and legal expense especially in the case of identity theft.  Repairing a credit history that doesn’t have glaring errors can take some time and effort as well.  It may require a dramatic change in attitude toward credit and a change in lifestyle.  But, if you are truly motivated to improve your credit, it may be what is necessary over the long term.