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How to Get Started With Credit Repair

Credit Repair- Getting Started

There are all kinds of credit repair tips out there. The reality is that if you have bad credit, there tons of simple solutions. It’s very possible to improve your credit and even completely fix it in a very short time period.

How? Here are four most of the most effective strategies:

#1) Credit counselling

This will not only give you strategies for better money management, but the company will negotiate with the creditors on your behalf as well. In many instances they can reduce the amount you owe substantially.

Since they are very experienced in the industry, they have a much better chance of negotiating better terms for you than if you were to do it yourself.

#2) Look for mistakes on your credit report

One very simple and easy method to quickly improve your credit is to just scan your report. Anyone can get a copy of their report for free at least once every 12 months, so it doesn’t cost you a dime.

What if you find errors?

Then just call up the credit bureau and let them know. They will look into it. If they verify that indeed they made a mistake, they will erase it from your report.

This will instantly improve your credit score. And since mistakes are quite common, there’s a good chance of this working.

And don’t give up.

Even if they don’t remove something the first time, keep after them. It might take two to three months, but eventually you can get that erroneous late payment taken off.

#3) Pay on time

This is one of the simplest methods to raise your credit. It’s so obvious it might not seem worth mentioning, but it’s one of the most important tips of all.

What if you can’t pay on time?

If this isn’t possible because you have too much debt, attempt to get a consolidation loan. This might reduce the amount you owe, and it also makes it easier for you to pay them.

#4) Build up your investments

Instead of spending on things you don’t need, start putting a certain percentage of your money away every month for investing. This is easily one of the best methods to repair your credit.

But be wary of scams.

Remember, there are many firms that go after people with bad credit. They claim they are going to help them you raise your score. But often times they just take your money and disappear.

How do you spot those companies?

Basically, if they charge you a huge upfront fee, you know they are dishonest. Also, if they say to dispute everything on your credit report even if it’s right, it’s certain they are not legit.

By implementing these tips, one at a time, you can improve your overall credit rating and start reaping the benefits of having a high credit score.

How to Apply for New Credit to Help Improve Your Credit Score

What if you’ve applied to card companies in the past but have gotten rejected? There are still things you can do.

One option is to get a secured card. Get one at a bank around you, and preferably the one you do business with. You have the best chance of getting accepted there. Also, focus on cards that are designed only for those with poor credit.

But don’t apply for too many at once.

If you get too many credit inquiries, financial companies will assume you are taking on more debt and will be less likely to work with you. It can also negatively impact your score.

And be cautious.

Just because you get accepted for a card doesn’t mean you should use it. Some of them will do more harm than good.

For instance, many have hidden rates such as very expensive late fees. This is particularly true of the bad credit cards. If you aren’t able to make all your payments, you will soon find yourself up deeply in debt again.

What about prepaid cards?

Don’t use them. They have no impact on your credit score. This is because you are just paying them off upfront, so there is no chance of default.

But remember to pay your bills on time.

There’s no point in getting a new card if you are just going to continue making late payments.

What if you can’t make your payments on time?

Then just spend what you have and no more. And you might have more money than you think. Do you really need that new tool set? What about all those magazine subscriptions? Try to cut back and budget where you can so that you can prioritize reducing your debts.

How long does it take to rebuild your credit?

It depends on your situation. But you didn’t get a bad credit score overnight, and you aren’t going to wipe it out that fast either.

Just make sure your payments are on time every month, and eventually your small efforts will add up. By faithfully paying your bills on time you will see a big difference.

Investment Ideas: Are You Making the Most of YOUR Savings?

The Scenario

Tim is a young professional in his early 20’s. Tim has been working at his first real job for a little over a year. He has been saving as much money in his 401(k) as allowed. The bulk of his 401(k) is in company stock.

Tim lives in an apartment and would like to purchase a house in the near future. He currently doesn’t have any money saved for a down payment.

He has one credit card at 17% interest with a significant balance, but only pays the minimum each month. He hasn’t purchased anything on the credit card for quite some time.

Analysis

It’s great that Tim is really socking away the money in his 401(k). Investing now for his retirement will give those funds many years of tax-deferred growth. However, there are some details in his financial picture that could prevent him from attaining both his short-term and long-term goals.

Suggestions that could put Tim in a better financial position:

1. Diversify his 401(k) investments. With the bulk of his portfolio in company stock, it’s too easy to lose it all should something catastrophic happen to his company. There are plenty of companies out there that sold at one time for $100+ per share that now sell for less than $0.05 per share.

‣ To minimize risk, money in a 401(k) should be spread around between several of the different available options. A little company stock is fine, but it should be less than 5% of the portfolio.
2. Save for a house. Tim could consider putting a little less into his 401(k) and putting the extra money into either a money market account or bonds until he has enough for the down payment. It’s not advisable to take a loan out of your 401(k) if it can be avoided.
3. Address his credit card balance ASAP. Even though Tim hasn’t been charging any more on his credit card, it will still take a good 30 years to pay it off if he continues making only the minimum payments.

‣ Depending on how large his debt payments are compared to his income, it might come into play negatively when he tries to qualify for a mortgage.

‣ Once Tim pays off the credit card, he could also put the money he was using for this debt payment toward his down payment on his house.
‣ Plus, paying off that credit card balance is akin to making 17% on his money.

Congratulations to Tim for saving money aggressively and consistently! Simply re-allocating some of his resources with these suggestions can set him up nicely for attaining his goals.

FURTHER READING:
Tips for Paying Off Credit Card Deb

How to Save Over $100 on Your Food Bill Every Month

Schedule an Appointment with Yourself for a Financial Checkup

May 9, 2012By admin General credit, credit score, financesLeave a Comment

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