It's not easy to repair your credit score yourself - but it's not as hard as you might have thought, either.
Three steps to clean up credit
- Obtain your credit report. You need to see what has been reported and make certain there are no inaccuracies. Most people don't realize that the credit reporting bureaus are notoriously inaccurate; as many as 79% of reports contain errors, and 29% of those errors can potentially result in a denial. You can get your credit reports free once every 12 months, so put it on your calendar. If there are errors on the report, have them removed or dispute them; they could be negatively impacting your overall score. Once you report an inaccurate item to the credit bureaus, they have 30 days to investigate and respond. If the lender doesn't confirm or respond to the investigation request, the item is removed. If you have documentation to prove the item is an error, send it along. Keep copies of everything and make a note to follow up in 30 days.
- Set a budget; get religious about sticking to it and paying all your bills on time. At 35% of the total, payment history is the largest factor in your credit score. Creditors want to know that you will pay your obligations on time. A budget will help you plan how you will manage your money so you can accomplish that. Late payments will stay on your report for up to seven years; however, creditors give more credence to your recent history. If you start paying your bills on time right now, your credit score could start showing the positive effects in as little as three months (but more likely it will take six or more).
- Pay down your credit cards. The amount of credit you use is the second largest component in your credit score. When you set your budget, list all your credit accounts, the balance you owe, the credit limit, and the amount of interest being charged. Focus first on paying down the cards where the balance owed is more than 30% of the credit limit, and the high-interest cards. Credit card debt is the most expensive debt you can incur; either pay down high-interest cards quickly, or transfer as much of the balance as possible to a card with lower interest rates. However, do not transfer to another credit account if that account is already carrying a high balance!
Is fast credit repair possible?
It depends on your definition of "fast." If "fast" for you is 6 to 12 months, then yes - fast credit repair is possible. If it's tomorrow or next week, then no - it's not possible. Unfortunately, time and conscientious management are the only cures for less-than-perfect credit scores.
It also depends on what your starting credit score is when you decide to work to improve it. Your efforts can result in an increase in your score by 50 points or more in 3 to 6 months. If your score is down in the 500 range, 50 points won't be a big help. Obviously, it's going to take a lot more effort and time to bring your score up into an acceptable range. However, if you're at 680, you can probably reach the magical 730 in that amount of time, which will make a significant difference in your lending rate and the amount you can borrow.
