With the calendar flipping over into a new year, resolutions are on everybody’s mind. Maybe you’ve resolved to pay off all of your debt this year. Maybe you are determined to get rid of those bad money habits that landed you in hot water in the first place. It’s important, though, when figuring out plans for the coming year to remember to focus as much on building something as on breaking old things down.
So, in this post, we’re going to talk about the things that you can do to repair your credit rating.
#1. Start at the Beginning
Before you can take action, you have to know where you’re starting. Getting your hands on a copy of your credit report is the best way to do that. You’re entilted to one free copy of your credit report from each of the three credit reporting bureaus every twelve months. What better time to get yours than during the start of a new year?
#2. Fix Any Mistakes
Go over each of those credit reports with the finest of fine toothed combs. There is no such thing as a “minor” mistake when it comes to your credit report. Dispute every single detail that is not 100% accurate. The credit bureaus allow you to do most of this through their websites. They will check into each dispute and if they cannot prove that what they have on record is the truth, that item will be taken off of your report.
Be patient with this. It can take a few months to get these blemishes erased. The credit agencies have 30 days to act on a dispute, then there’s a 30 day wait for the information to be proven and then they have up to 30 days to correct the information on your record. It won’t happen in just a few hours.
#3. Take Out a Secured Credit Card
If you’ve just paid off a ton of debt you’re probably reluctant to take on anything new. And, if you have a history of only paying minimums or maxing out cards, you aren’t yet ready for an unsecured credit line.
A secured credit line is one that you open up with some sort of collateral, typically cash. They are typically granted in smaller amounts–most start at around $300. You pay the bank your $300 and they give you a card with a $300 limit. You then use that card like you would any credit card: paying for things and then paying off the balance. If you default, the bank simply keeps the money you gave them as collateral. It’s sort of like a gift card except that your payment history gets reported to the credit bureaus. Secured lines of credit are great ways to teach yourself new and responsible habits while also building up a positive payment history on your credit report.
#4. Work with Bad Credit Financers For Bigger Things
You don’t want to take on a lot of debt, but after successfully managing your secured credit card(s) for six months or so, you will probably feel ready to take on a larger type of debt. A good way to do this is to buy a car. The best way to do this is to work with a “middle man” who helps people with bad or sketchy credit get auto loans. One such “middleman”, Consumer Portfolio Services, buys automobile contracts from dealerships and retailers and then “sells” them to people whose credit will get them turned away at a regular bank. You then take the loan from CPS (or whoever) and they report your positive payment history to the credit bureaus.
If you manage to go a year without any major slip ups–missing payments, only paying the bare minimums, defaulting on a credit line, congratulations! You’re on your way to having positive and solid credit for good!