Clean Up Your Credit Problems

If your credit rating isn’t where you want it or you’ve been refused credit, take action today to get your finances back on track!

Three out of four American households hold at least one credit card. If you’re one of them, you have a credit history and a credit rating. Your credit rating lets you rent a video, or buy a house. So some of the money mishaps of your youth might be following you,j as well as other, often unsuspected, factors that influence your credit rating. Even if you’ve made some mistakes, improving your credit is easier than you might think.

How bad is it really?

Get a copy of your credit report. Three bureaus compile them: Equifax, Experian, and TransUntion. If you’ve been denied credit in the past 60 days, or are on public assistance, the report is free. Otherwise you’ll pay around $9 for one or up to $35 for all three.

Look on the first page for your credit score. This is a rating of how well you handle your finances based on certain factors such as the number of late payments and your total debt.
*Looking good. If the score is 720 or highter (out of a possible 850), you’re in great shape.
*Still okay. From 620 to 720 is still satisfactory, but you probably won’t be offered rock-bottom rates from credit card and mortgage companies.
*Need help. Below 620 means that you’ve got some serious blemishes on your record: payments more than 90 days late, for instance, or a loan you defaulted on. The only type of credit card you’ll likely be offered is “secured“, which requires that you send the card company a deposit for the full amount of your credit limit.

Even if your score is low, take heart. There’s always a way to work it out. A lot of people are embarrassed or upset. They feel isolated, but they’re not alone. You have to learn what resources are available and know what steps to take.

Begin to fix what you can

Pore over every line of your report. Are there accounts you don’t recognize or a bill that’s unpaid? At least half of all credit reports contain some kind of error. Once you’ve identified the errors, the rest is up to you. It’s time consuming, and you may have to make a lot of calls, but it’s worth it.
*Write to the credit bureau. To correct a mistake, write to the credit bureau and send supporting documentation if you have it. The bureau must respond within 30 days and either verify the information or delete it from your file.
*Pay off old bills. Next, identify any debts that are more than 90 days past due. There are often bills that have been sitting out there for years.
*Make calls. Call the creditor directly at the phone number shown on the report and ask, “If I pay this in full right away (or make a major payment), will you remove this from my credit report?” Many lenders will agree, and you’ll erase a big blot from your record. Make sure you get the agreement in writing before you make a payment.
*Update your address. If you moved and overlooked a bill sent to your old address, call the creditor and explain the circumstances. If your account is in good standing, they’ll probably remove the black mark.
*Make regular payments. Figure out how much you can devote to paying off debt: about 15% of your monthly take-home pay is a reasonable amount. Then, pay your bills on time every month.
*Get a new line of credit. After you clean up your credit report, it’s time to start rebuilding your rating. Start slowly with only one credit card. Use it for food, gas, and other small expenses that you can pay off each month. Don’t just let it sit in your wallet. The only way you can establish a new and improved credit history is to pay your bills on time.