Do want to fix your bad credit score? These tips for rebuilding your credit will help you cope with major debt; they’re from Chris Scully, financial expert and president of CarePlus Financial.
Before his tips, a quip:
“Debt is like any other trap, easy enough to get into, but hard enough to get out of.” – Henry Wheeler Shaw.
To get out of the debt trap, remember that rebuilding your credit can improve your credit score sooner than you think! For info on surviving financial bankruptcy, click Credit After Bankruptcy by Stephen Snyder. And, read on for Scully’s tips for rebuilding your credit.
How to Fix Bad Credit Scores — 3 Tips for Rebuilding Credit
1. Be wary of “credit repair” companies that say they can get factual derogatory information off your report and “restore your credit.” The claim is bogus. Here’s what they do: They ask you to send a copy of your credit report. Then they proceed to dispute every derogatory item on the report. They do not verify whether or not the things they’re disputing are accurately reported. They’re approach is simply, “if it’s a derogatory item, dispute it.” They dispute accounts usually by flooding the credit bureaus with dispute letters (usually sent out in your name).
The credit bureaus must investigate the item disputed and if the creditor does not verify the correctness of the reported item it must be removed from your credit report. Most often the creditor has to dig through archived records and can not respond within the time frame for the investigation. The credit bureau deletes the report for a while. Then the creditor gets the account verified and sends that verification along to the credit bureaus and the derogatory item goes right back on the credit report.
Once in a while a credit repair company gets lucky and the creditor’s files are messed up or something and the creditor never does provide verification of the debt. In those cases the item is permanently deleted from the credit report. There’s another problem with these companies. If they send out too many letters on your behalf disputing items on your credit report that are valid, the credit bureau could flag you as someone who sends in frivolous disputes. If that happens, they no longer have to treat your claims seriously and don’t have to investigate your disputes.
2. Live within your means and save money. Learn to plan your spending and expenses and don’t spend more than you make any month. You don’t HAVE to “keep up with the Jones’s”. You don’t HAVE to get the brand new ReallyKoolGadget the day it goes on the market. Don’t even try to rebuild credit if you can’t do this! You will eventually fail. If you can learn to live without credit, you can then learn to use credit wisely.
3. If you’re starting over after a financial bankruptcy, get a secured credit card. A secured card is one where you open a savings account or certificate of deposit and that account is used as collateral for the credit card. If you default on the card, you lose the savings account. Most of these accounts will release the savings requirement within about a year if you have a good payment history. When you have the credit card, use it to buy gas for your car or something that you have been paying for with cash or your debit card. Pay the bill in full every month when it comes due. After a while you will start receiving offers of credit in the mail. You’ll want to accept a few of them. Use each new card the same way you’re using the secured card. The most important thing to realize is that credit cards are not assets for you, they’re liabilities.
Need encouragement? Sign up for my weekly "Echoes of Joy" email - it's free, short, and energizing. Like me! Is your relationship in trouble? Get 7 Steps to Fixing Your Marriage from relationship coach Mort Fertel. It's free and helpful, no strings attached.
If you want to rebuild your credit, you need to consolidate your debt. Read 7 Ways to Get $10,000 – From Refinancing a Mortgage to Asking Mom.
Chris Scully is the President and co-owner of CarePlus Financial, Inc; he’s been helping people get out of debt and rebuild their credit for about 10 years.