By Stacy Francis, CFP®, CDFA
According to myFICO, it’s important to note that repairing bad credit is a bit like losing weight: It takes time, and there is no quick fix. In fact, out of all of the ways to improve a credit score, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast.
Here are some of the top tips to raise your score.
- Pay down balances and pay off all outstanding debts. A main ingredient in the credit score formula, the size of your balances really does matter. Pay them down – or even better, off. Here’s more advice on paying off credit card debt.
- Protest unfair information. If you have an entry on your credit report that shouldn’t be there (honestly, now), know that you can dispute it. If you submit complaints to the company that posted it as well as the credit-reporting agency, they will investigate and take it off, leaving your record a whole lot cleaner.
- Contact creditors. Write letters to creditors explaining any payments that were more than 60 days late. Request that the creditor share that information with the credit companies. If you’ve been a loyal customer for years and normally make your payments on time, chances are, if you talk to customer service, they will disregard that one time you forgot to pay your bill because you were on your honeymoon. Ask politely – and thou shall receive.
- Don’t neglect the oldies. Another important factor in the credit score formula is how long your accounts have been open. So even if the Victoria’s Secret card you applied for when you were in college doesn’t have the most useful perks, use it once in a while for a credit score boost.
- Cancel any credit cards or department store cards that you don’t use. Be sure to put the cancellation in writing so the account will show you canceled it versus the credit card company.
- Pay your bills on time. It seems simple, yet so many people fail on this count. If you have a hard time remembering your payments, set up a reminder.
Be careful about tainting your good credit with debt incurred by someone else with lower credit quality than you, such as a new spouse. Help your partner clean up his or her credit before you begin co-signing on additional credit.
Removing Incorrect Entries from your Credit Report
Many people don’t know that if you feel an entry on your credit report has been put there in error, you can complain in writing to the credit-reporting agency (meaning that if this certain record has been reported to all three agencies, you need to send letters to each one of them separately). The agency then advises the company that put the entry on your record about your complaint, and it has thirty days to respond and strengthen its case. If it fails to do so, the reporting agency removes the entry from your record.
This may sound like a “so what?”, but the truth is many companies are so overwhelmed, if your entry is minor enough (or complicated enough), chances are, they won’t think it’s worth their time to fight your claim. I know many people who have used this technique to improve their credit histories – and thus their futures. It only takes a few letters, and the most it’ll cost you is a couple of stamps.
So next time the thought of spending hours on the phone trying to cut through layers of bureaucracy makes you cringe, try this alternative approach and throw the bureaucracy right back at them!
READ ALSO: What You Need to Know About Credit
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