How To Repair Credit

Do you know how to repair credit?

How To Repair CreditEvery adult U.S. citizen has their financial activities documented by private companies established for that purpose. As you go about your day-to-day activities, these firms record every transaction you carry out. Interestingly, they do not seek your permission to profile your financial acts. Welcome to the intriguing world of credit bureaus. The information that they gather comes from all sectors. They immediately know it when you pay for auto insurance, telephone bill or eat at a restaurant. After compiling consumer data, these reporting agencies create a profile that shows your credit-worthiness.

No opportunity for self-defense

Since your financial dealings get reported without your knowledge, you have no chance of either approving or disapproving the same. Much later, the inaccurate data creates an obstacle and prevents you from obtaining credit facilities from lenders. If you receive credit, it comes at an exorbitant cost. A task that you were not involved ends up becoming a significant matter. It affects your financial prowess for the rest of your life. Apart from the data supplied by lenders and other financial bodies, reporting agencies also use information found in public records to profile you. You would be better off learning how to repair credit.

With corporation collecting and selling your financial information, it is only fair that the federal government had to pass a legislation. One of these is the Fair Credit and Reporting Act enacted on October 26, 1970. The bill protects you from inaccurate information that a credit bureau enters either into your free credit reports either negligently or willfully.

Tips on credit repair

Demand to know the credit bureau whose report the creditor used

If a lender or an individual relied on information on your credit report and rejected your application for a loan, they must give you details of the agency. The lender must also provide you with phone numbers, and physical address. Using these details, you can then request for disclosure of contents kept in the reporting agency’s files. In most cases, you do not pay for this information. Besides, the legislation mentioned earlier states that every consumer has the right to get a free report once every year.

Verify what you owe

The Fair Credit and Reporting Act allow you to investigate the contents of your credit report. Experian, Transunion, and Equifax have the duty to provide consumers with a credit status report at no cost. Ensure that you obtain one from each of the three agencies. Carefully examine the statements and look for incorrect entries. If you find any, notify the reporting agency through the mail and request them to verify. Usually, they will carry out investigations and respond. The law gives a 30-day window for feedback and rectification of errors.

If debt verification fails

When the response from the credit bureau is not sufficient, you should send another letter. In the second communication, you seek to find out how the agency carried out the verification process. The bureau should give names of persons contacted plus their addresses. However, you must be careful to back your new request with evidence. Otherwise, credit bureaus can opt to treat your new quest as a malicious attempt to discredit them.

Registered mail vs. filing your dispute online

Disputing all or part of your credit report online is fast and direct. However, you cannot only summarize the things in disagreement. For online disputes, the web pages contain pre-selected choices. Your task is merely to choose one that best describes the nature of your argument. Registering your dissatisfaction on mail allows you the freedom to express yourself fully. Also, you can attach some proof to your letter. Keep copies of the communication exchanged with the reporting agency. Put all correspondence neatly into a file. Registered mail provides a paper trail. Use this mode to communicate with credit bureaus.

Dealing with collection items

Debt collection firms have an annoying way of intruding in your peace. They will send you a demand letter in a yellow envelope. The bright color is to make the mail noticeable. While going through your mail, no matter how tired your eyes are, you cannot fail to spot the bright yellow envelope. The letter demands that you pay a debt by a certain time. The debt collector also threatens that if you do not settle, they will proceed to provide negative information to the credit bureaus. Judging by how the system works, debt collectors can only make good their threat 30 days after the date of the last communication. How do you handle them?

  1. Stay calm
    Remember the part where we mentioned that you could seek for a debt validation? If you cannot recall details of the debt in question, ask the collector to validate it. While you are not disputing that you borrowed money from lender X or lender Y, the debt collector is merely an agent and not the principal.
  2. Stay calm
    Remember the part where we mentioned that you could seek for a debt validation? If you cannot recall details of the debt in question, ask the collector to validate it. While you are not disputing that you borrowed money from lender X or lender Y, the debt collector is merely an agent and not the principal.
  3. Place a validation request
    Write back to the company that sent you the demand letter and request them to show proof that you owe their master. If the debt collector fails to validate, they cannot purport to ruin your credit standing. In case they do, you can sue them under the Fair Credit Act.
  4. Take legal action
    Where a debt collector acts in violation of conditions stipulated in the FCRA, you have the right to sue for damages.

Pay your bills when they are due

Late payments can easily put a dent on your credit score. Make it a habit to pay your utility expenses by their due dates. There are times when you cannot manage to pay on time. Be wise and choose which bills can delay. Credit card providers and mortgage lenders cannot fail to report late payments. Therefore, give these a priority. Utility providers are unlikely to report lateness by customers to settle their bills. If you must run late, let it affect accounts not listed in your report.

Credit utilization ratio – lower it

The term “credit utilization ratio” refers to the amount of debt in your possession compared to what is available for spending. Lenders reckon that when you have available credit of 30 percent or lower, you are a less risky borrower. Keep your credit utilization ratio at a max of 49 percent. If you can tend toward the 30 percent, consider that as good progress. Alternatively, you can opt for an increase in your credit limit, but you will have to ask the lender nicely. Most will gladly grant your request; if you have a high balance, they make more money. Once the card company increases the limit, be careful not to use the additional credit. Otherwise, you will fall back into a worse pit than where you were.

Request for removal of negative items

Removing negative items is not an easy task, but have you tried asking nicely? Creditors feed credit bureaus with information and tell them what to put where. On the flipside, they can ask them to remove any entries, and it gets done. Take advantage of the business relationship you have with the credit card company. Most of the time, they will agree.

Refute accurate information – reverse psychology

Most of the discussion so far has leaned on the removal of inaccurate information. Did you know that you can also question the authenticity of accurate information? For instance, you may have a debt that, despite efforts by the collection agency, you ignored and never paid. On their part, the collector gave and did not pursue the matter any further. However, the entry remains and will affect your credit report. Sometimes, if you push your luck, the reporting agency will remove the listing.

A credit repair company would love to take advantage of such scenarios. As you have seen earlier, whenever a consumer disputes anything, the credit bureau goes back to the creditor and seeks verification. Often, collection agencies ignore such requests. When this happens, the credit bureau must remove the queried item from a consumer’s credit report. You too could try this strategy.

Wrap up

No financial activity goes undocumented by parties with interest in determining your credit-worthiness. You have no authority to stop them from collecting information about your financial transactions. The FCRA shields all consumers from negligence on the part of credit bureaus. Through this law, you can take positive steps that will result in repair of your dented credit image. By putting the credit reporting agencies, you could slowly but surely begin to make a comeback. Your relentless efforts must yield fruit but only through exerting pressure where it matters.

Not only do you need to verify your debts every time but also make sure that you pay your bills on time. Aim for a lower credit utilization ratio on your credit card accounts. Never take for granted the power that lies in asking for favors – just ask nicely. Also, do not focus all the time on disputing inaccurate information. If you find something disputable, challenge it too.

Author: Jay Batson

My Name is Jay has and I have a passion for financial writing. I am the chief writer on this blog. I do my best to verify all the information but if there is anything amiss please let me know and I will do my best to correct it.