How to Fix Your Credit?

Step 1. Refrain From Incurring More Hard Inquiries

Inquiries occur when an entity or individual is attempting to see what your score is. They can be hard or soft. Soft inquiries do not affect your credit report, whereas hard inquiries do. Soft checks may be out of your control, such as when a company determines that they would like to have you as a customer, and sends you a pre-approved card in the mail.

Hard inquiries are in your control, and unfortunately, they knock down your score a few points each time one gets recorded in one of your credit accounts. You incur these types of checks when applying for a new line of credit, such as when shopping for a car or home. If you want to begin to repair your credit, the best place to start is by not making it worse.

Remember that not all checks are treated equally. For example, if you have accumulated three or four hard checks over the course of a few days from different car companies while trying to buy one new car, these checks should all be treated as only one inquiry. Should a reporting agency treat it as multiple inquiries, this can be disputed—a process described in step five of this article.

Step 2. Check Your Score

The second step of fixing bad credit is seeing how bad the damage actually is. No matter what financial institution you have relations with, you can check your credit for free at least once a year from each of the major bureaus. This annual free checkup will not be a hard inquiry, costing you points. Depending on what platform you use, some will provide you with more free checkups. Under pandemic conditions, they will provide you with free weekly credit reports until April 2022.

If your credit is above 675, you’re in the clear and likely do not need to do anything more to improve your standing. If it’s lower though, it may begin to get in the way of obtaining the funding you need for your economic goals. If you perform this check and find that your score is below 400, then you should probably retain professional credit help, detailed in the next section.

Step 3. Utilize Professional Services

Credit repair services are by no means necessary for boosting your score. However, utilizing them may be the fastest way to fix your credit. If your score is extremely low, obtaining the assistance of someone who knows what they are doing may also give you the best chance at raising your score to the maximum amount possible in the least amount of time possible.

Not sure which of the credit repair companies to use? Some of the best options for general help are as follows:

• Lexington Law;
• Sky Blue Credit Repair;
• Creditrepair.com;
• The Credit People.

You cannot go wrong with any of the above options. Some other companies include Ovation and Credit Saint. Choose whichever meets your unique needs. Remember that the Credit Repair Organizations Act protects you from professionals making promises that cannot be kept, so you can trust that these companies can do for you what they say they will.

Step 4. Pay off What You Can

Whether you are retaining credit repair companies or not, one of the best ways to repair credit is to pay off any late or outstanding debts. After all, timeliness and completeness of payment are some of the largest factors that go into determining your score.

If you have the liquid assets to do so, paying off outstanding balances will increase your score without fail. There are even ways to take out loans to pay off your existing debt. These loans can help you out by having perks such as a diminished interest rate, but more on this is described in step six.

Even if you cannot pay for all of them at once, it is better to chip away at the sum little by little than to let it sit until you pay it all at once. People often overlook this simple step in DIY credit repair and jump right to challenging it, described in the next section.

Step 5. Analyze Potential Challenges

Disputing, also known as challenging, is not always an available method for attempting to fix your credit. The dispute process begins by coming through your records to see if any of them are incorrect. An example of a mistake could be late payments that you have already taken care of still appearing on your profile. Another good example would be an unpaid purchase that you did not make appearing on your account.

A good way to fix credit fast is to challenge these errors. However, it is crucial to note that they have to be legitimate errors made on behalf of a reporting agency. If the error is not genuine, or it was an error on your part, then your challenge is most definitely going to be denied. As a result, you cannot challenge real monthly bills owed that you have not sent in payments for yet, or request for authentic unpaid purchases to be removed.

The Dispute Letter

Disputing part of your credit report involves sending a letter to the bureau that you believe has made an error. This may be one of the more challenging parts of learning how to repair credit, as there are specific guidelines that must be followed. The letter should contain:

• A professional address;
• The dates and amounts of the lines you believe to be incorrect;
• A calm explanation of why they are incorrect; and
• Proof backing up your claims, either in your letter or as an attachment.

When writing your challenge, remember that it will do no good to use rude or urgent language. The person who will be tasked with reviewing your letter is not the person that made the original error, but this will be the person that stands between you and repairing your credit.

Once you submit your letter, expect that it will take around one month to hear a response back about its success. If you do not want to write and send this letter yourself, remember that you can get credit repair tips and assistance from professionals. All of the professional agencies above have successfully challenged mistakes in the past and helped clients in fixing their credit scores.

Step 6. Restructure Accumulated Debt

Wondering how to fix your credit when you cannot pay it all off right away? Whether you’re in a financial hole because you cannot afford to pay for the new car you’re driving or you let your credit card balances get out of hand, restructuring may be a good option for you. However, this option should be treated as a last resort, hence why it falls near the bottom of this list.

There are a few different forms that restructuring can take, including but not limited to:

•  Reducing your interest rates;
• Extending allowed payment time;
• Forgiving credit card debt and other sums owed completely; and
• Being given another chance to pay off lines that are past due.

The above deals can be offered by your lending entity, or you can attempt to bring the negotiations to the table. At the end of the day, you want a better score, and lenders want to get paid.

Alternatives to Restructuring

If none of the above options sounds good to you, you aren’t out of luck. It is possible to clean credit reports in other ways as well. One popular way of doing this is filing for bankruptcy. Bankruptcy is essentially a formal way to let the government, credit reporting agencies, and lenders know that you are not able to pay all that you owe.

While bankruptcy sounds enticing, it is often a long, grueling, and shameful process. It may involve nearly everything you own of value being taken and resold to squeeze as much money as possible out of you before your history is wiped. As miserable as this may be, it can be the best way to fix credit that is too far gone to help in any other way.

Before deciding to file for bankruptcy, it is highly recommended that you meet with a professional to discuss your other options. They may be able to identify ways to repair your credit score that you missed on your own and that should be performed before embarking on a bankruptcy journey.

Step 7. Evaluate the Necessity of Your Existing Accounts

Once you have learned how to fix bad credit or cleared your credit history via bankruptcy, you should sit down and take a hard look at the credit lines you have open. There are three main different types of lines:

• Revolving: Lets you borrow, spend, and then borrow again in a “revolving cycle”;
• Installment: Where you borrow a lump sum and then pay it back in predetermined time increments, such as on a monthly basis until you have paid back all that you owe; and
• Open: Different from revolving in that you may not have a credit limit, but you still have to pay the money that you owe in full (i.e. utilities and charge cards).

Maintaining all three of these line varieties may help to fix a credit score by showing entities that you can juggle different balls responsibly. However, it is better to maintain one line successfully than to do a bad job at maintaining multiple. If you know that you need to reduce your lines, but aren’t sure where to start, perhaps it would be valuable to get the advice of a credit repair organization.

Step 8. Reorganize Your Finances

If you have taken all of the steps described in this list, then you’re likely nearly finished with fixing your credit. Now comes the most important part of the aftermath—not letting your new high score fall back down! Today’s technology makes staying on top of your finances easier than ever. Automatic payment programs exist for nearly every line of credit you can take out.

By utilizing these free credit repair suggestions, avoiding outstanding sums owed, and going forward responsibly, you should be able to stay out of the hole just fine. If you would like to make sure that you never have to try and fix credit again, see if your bank offers free financial management assistance. Sometimes, all you need is someone else to hold you accountable to stay on top of your microeconomics.