All too often, we don’t pay attention to our credit until we really need it — to buy a house, for example, or to finance a new car. But if your credit is less than stellar, that’s the worst possible time to do anything about it. Improving or repairing credit doesn’t happen overnight. It takes time to build a positive credit history, and it takes time to dispute negative listings that are hurting your credit score.
Monitoring your credit? You’re entitled to one free credit report — from each of the credit reporting agencies — once every 12 months, which you can request via AnnualCreditReport.com. Make the most of it. Only by checking your reports can you discover erroneous listings that, left unattended to, can wreak havoc on your credit score. Speaking of, it’s important to monitor your credit score as well. While you are not legally entitled to free access to your score, keeping up with it is well worth the nominal fee.
Disputing erroneous credit report listings? When you check your credit reports, go through them with a fine-tooth comb. Double- and triple-check that all of the listings are correct. This includes personal information, like your current and previous addresses, as well as lines of credit and payment history. And if a credit account listing doesn’t ring a bell, take note. You could have been a victim of identity theft. In any one of these situations, write a letter of dispute to each of the credit reporting agencies. Be sure to send it via regular mail, certified. They have 30 to 45 days from the receipt of the letter to investigate and respond.
Using your credit cards? If you have them, make the most of them. Simply having credit cards does nothing to help boost your credit. Instead, what lenders like to see is that you know how to responsibly use credit. A purchase or two every month can do the trick.
Paying off your credit card balances every month? While using your credit cards is important, equally so is paying them off. The goal: to maintain zero balances so as to avoid finance charges. Of course, this means only charging to your cards as much as you can afford to pay off with cash before the due date. So you are best served using your cards for bills and/or necessities that you have to pay or purchase anyway.
Limiting your credit inquiries? An application for credit now and then is a good thing — when taking out a mortgage, buying a car, or applying for a new credit card that can help boost your credit. However, be mindful of keeping applications at a minimum, as each is a “hard inquiry” that does count against your credit score.
Requesting debt validation for old, unpaid debt? One of the biggest drags on your credit is old, unpaid debt that you may no longer be legally responsible for anyway? Instead of letting it sit there, dragging down your score, request validation of the debt. Old accounts have usually been sold off to third-party collectors, not just once, but multiple times. Rarely do all the supporting records go with it. In other words, whoever’s collecting on your old debt today may not be able to prove you owe it. And even if they can, the statute of limitations may have run out, which varies by the type of debt and the state in which you live.
Taking steps to restore your credit? If your credit is bad, it doesn’t have to be that way. The first step is debt validation. Once you’ve had as many negative listings removed as possible, the next step is applying for a secured credit card that reports to the credit bureaus. Then it’s just a matter of using your available credit (but not more than 30 percent), paying off your balances every month, and keeping an eye on your reports and score to see how your credit repair efforts are progressing.