Discover 5 Practical Credit Repair Tips

For today’s guest post on credit repair, please welcome CFA and fellow blogger Steven Millstein.

Putting good credit after bad is the best way to improve a credit rating over the long term. The fundamentals of putting good credit after bad include paying your bills on time and limiting the amount of credit that you rely on. However, there are other, lesser-known ways to practice effective credit repair. To help you build a stronger credit rating which makes it easier to access affordable credit when you need it, I would like to share 5 practical credit repair tips. Use one, a few or all of them in order to get the type of credit rating that lenders want to see!

If your credit has taken some dings, you need to work on restoring it. Here are 5 practical credit repair tips to get you started.

1. Dispute Negative Credit Report Entries

If you’ve been getting hassled by a collection agency and you think that the collection agency may have inaccurate information about your debt, you should take action. Under the stipulations of the Fair Debt Collection Practices Act (FDCPA), it’s your right to dispute a credit entry which is incorrect. In order to find out exactly why a collection agency is bothering you and harming your credit score, you should send the collection agency a letter. Ask the collection agency to provide you with proof that the debt is rightfully yours.

You have the legal wherewithal to do this. A lot of people don’t realize that they do have recourse when collection agencies add entries to their credit reports.

The letter that you’ll send out (always send a letter; don’t ask for proof that the debt is yours over the phone) is called a Debt Validation Letter. It’s a simple document, but there are templates available online if you need help putting the letter together. Once the collection agency receives the letter, the agency will have 30 days to provide you with proof that the debt is yours. One tip is that you need to send out the Debt Validation Letter within 30 days of first contact by the collection agency.

If you find that the information provided by the collection agency is wrong, dispute it. Gather credit reports from TransUnion, Equifax, and Experian. Then, find the entry in question, write letters to each of the three credit bureaus (explain why the entry is wrong and send the letters in). If the credit bureaus do their investigations and find that the information is wrong, it will be removed from your credit report, which means that your score should go up fast.

2. Limit Your Reliance on Credit

You should have some credit, but not too much. For example, you may not know that applying for a bunch of loans at the same time, or close to the same time, is going to harm your credit rating. With all of this in mind, you should streamline your reliance on credit. When you need new credit, you shouldn’t apply to too many different lenders. Keep things moderate. It’s one of the keys to improving a credit score and keeping it good in the future. For example, have one credit card, one line of credit and one car loan. Don’t have five credit cards, several personal loans, a line of credit and a car loan.

3. Make Payments on Time

In the age of web-based banking, it’s very simple to set up automated payments. When you do automate your payments, you’ll be able to ensure that you never miss a payment again. Late payments may hurt you, especially if you’re thirty days late or more. Make a concerted effort to pay at least the minimum on each debt monthly, or more frequently if you have payment terms that are bi-weekly or weekly.

When you miss payments, companies will have the option of reporting you, as long as you are sufficiently late to pay. Don’t give companies the option of hurting your credit score. If you have trouble covering all of your payments on time, consider debt consolidation.

4. Consolidate Your Debts

If you have a lot of debts, at different rates of interest, with different payment deadlines, you may find that it’s hard to pay in a timely fashion. You may also pay more for interest than you have to. The interest charges that you need to pay will negatively impact your capacity to pay down your debt. The best way to tackle these problems is to put all of your debts into one low-interest loan. Then, all that you’ll need to do is make one payment every month, to the lender, rather than making a ton of payments to your creditors. However, before you sign on for debt consolidation, you should shop around for a great rate of interest, as well as a reputable loan provider.

5. Negotiate Lower Interest Rates for Credit Cards

One last tip is to try and do a deal with your creditors, such as credit card companies. Call up and ask for lower rates of interest outright. Credit card companies and other creditors do want your business, so they are often willing to lower interest rates. It is always worth trying. When your interest rates are lower, you’ll be able to pay down debt at a faster rate and this will help you to put good credit after bad.

Now that you know 5 practical credit repair tips, why not put them into practice today?

Disease Called Debt

About Steven Millstein

Steven is a Chartered Financial Analyst (CFA) and professional personal finance writer. He is a contributor for several professional finance sites. His work has been mentioned in and linked to from, USA Today, The Huffington Post, Benzinga, Investopedia and many other publications. He also has his own personal finance blog, CreditZeal, where you can follow him.
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4 Comments

  1. If you are already in a pinch and are being pursued by a collection agency make sure to negotiate as part of the payoff to not have it reported to the major credit bureaus. This is something many individuals don’t know is possible and they are just so happy to resolve the issue at a lower payment it often times slips their minds.

  2. People in the personal finance community love credit card hacking for travel rewards. I’ve wondered what that does to their credit.

    Great tips, Steven. Thanks for the post, Gary.
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