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Answer These Tough Credit Repair Questions When Fixing Your Credit

Questions to Answer When Fixing Your Credit

Last Updated: July 24, 2016

To solve your credit repair problems, you have to be willing to ask the tough questions. While it may feel intimidating at first, the deeper you delve into the answers, the more empowered you'll feel take action.

Are You Checking Your Credit Reports?

If you want to improve your credit, monitoring your credit reports is imperative. This is the only way of knowing what negative listings are dragging down your score. Then, and only then, can you take steps aimed either having these listings removed, or adding positive credit to offset the negative. For the free credit reports your are entitled to once a year -- from all three major credit reporting bureaus -- go to AnnualCreditReport.com.

Are You Disputing Errors on Your Credit Reports?

Once you receive your credit reports, go through them with a fine-tooth comb. From a misspelled name to a credit account you don't recognize, immediately send a letter of dispute to the credit reporting agency. Do so via regular certified mail, so there is no question of receipt. This will also give you a date from which to count the 30 to 45 days the agency has to respond.

Are You Requesting Validation on Old Debt?

If a review of your credit report shows that one or more of your debts has been sold from the original creditor, send to the appropriate credit bureau a letter requesting debt validation. The more times your credit account has been sold, the less likely they have the supporting documents to prove the debt belongs to you. If they cannot prove it, you are not legally obligated to pay it.

Are You Aware of the Statute of Limitations on Debt in Your State?

Once debt reaches its statute of limitations, you are no longer legally responsible for it. While it should automatically fall off of your credit reports once it reaches the statute of limitations, this is not always the case. Research the statutes in your state and make note of when each type of debt you have should disappear from your credit reports. If it doesn't, dispute it with the appropriate credit bureau.

Are You Negotiating/Settling Debt With Your Creditors?

If you are struggling to pay a debt, either to an original creditor or to a collector that was able to provide debt validation, try to negotiate and settle your debt for an amount smaller than what you owe. At the very least, you may be able to set up a manageable payment plan. And if you do reach an agreement, ask if it can include the removal of the negative listing from your credit report. Creditors are not obligated to do this, but it is within their means.

Do You Know How Much Debt Your Are In?

Many people avoid keeping track of their debt for fear of a number that may seem insurmountable. But unless you do the math, you're either underestimating or overestimating what you owe, and both come with unwanted consequences. If you underestimate what you owe, you're more likely to take on new debt that only makes the problem worse. If you overestimate what you owe, you're likely to ignore it completely, certain it's too great a mountain to scale. Only by knowing precisely what you owe from month to month can you make a practical, effective plan for dealing with it.

Do You Have a Plan For Getting Out of Debt?

If you haven't already, make a list of all debts owed (that you can't have removed through debt validation) and decide which debts you are going to eliminate first. Conventional wisdom says to pay off your highest-interest loans first. However, it can be invaluably motivating to first pay off the smallest of your balances, so that you can see an immediate dent in your mountain of debt.

Do You Know What You Are Paying in Interest Fees Every Month?

This is what your credit is costing you. Doing the math is a great motivator for creating and cementing a plan of action.

Do You Know What Percentage of Your Income is Going to Your Debt?

Like monthly interest fees on credit owed, knowing what percentage of your income goes toward paying them is a great motivator for getting out of it. It's also a number lenders look at when considering credit-worthiness. If you're paying more than 36 percent of your income on debt, it doesn't look good.

Do You Know How Much Credit is Available to You?

Knowing your available credit is the only way of making sure you don't exceed the recommended credit utilization ratio of 30 percent. For instance, if you have $1,000 of available credit, you don't want your balance to exceed $300.

Are You Using Your Available Credit?

While it's imperative that you not use too much of your available credit, it's equally important not to use too little. You prove your credit-worthiness by showing you know how to use it. That means, for example, charging something to your credit cards every month. The key is making sure it's something you would be paying for anyway -- like gas, groceries, or the phone bill -- instead of using credit as an excuse to buy something non-essential that you can't afford to pay back by the end of the month.

Are You Making Payments Before the Due Date?

If you plan accordingly, you can use your credit cards without carrying a balance (i.e., paying interest fees).

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Are You Paying Off Your Balances?

Ideally, you want to pay off your credit card balances every month. This means only charging as much to the cards as you know you will have cash on hand to cover before your due date. If circumstances prevent you from doing so, at the very least make more than your minimum payment every month so that you can be making some sort of dent in the balance.

Do You Have a Good Mix of Credit Accounts?

The more varied your lines of credit, the better your credit score. In fact, 10 percent of your score depends on it. For instance, a home loan, auto loan, and credit card loans are a good mix of things. That said, if you're already struggling to make ends meet with your current debt load, pay that off before applying for any new credit accounts.

Do You Know Your Credit Score?

Unlike credit reports, you are not entitled to a free credit score. However, it's well worth the cost of paying for your credit score at least once a year. This way you can get a feel for how your credit repair efforts are affecting your score, and you can make informed decisions about whether or not to apply for new credit depending on whether your score is excellent, good, fair, or poor.

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