A lot has been said about the disadvantages of having a poor credit score. It not only reduces your chances of getting a loan but also makes the loan terms less friendly.

Choosing to repair your credit score does not (necessarily) mean that you are working on your scores directly. It means that you are working on the factors that influence your scores. These factors include credit utilization and credit to debt ratio. Whether you are a victim of identity theft or you missed a payment, the process of repairing your credit score takes up to 6 months. You can choose to work with a legitimate credit repair company or do it yourself.

Ways in which you can repair damaged credit score

1) Request, check, and review your credit reports

To begin with, request for a free copy of your credit report each year, from the three credit bureaus: Equifax, Experian, and Transunion. Check for any inaccurate or incomplete information and ensure you clearly understand your current position.

Why is it important

  • It will help rebuild and maintain good credit by correcting inaccurate information
  • It will enable you to monitor your progress especially when recovering from past credit problems
  • It makes you more aware of what lenders and creditors see
  • It acts as an indicator that you might be an identity theft victim

2) Dispute negative marks

Derogatory remarks, comments, and errors weigh heavily on your overall score. Although some disputes will take longer to resolve than others, initiating a dispute will require the credit bureaus to investigate and make a report. You only need to click the dispute button and remove liability from your account. If the claims are false, the matter will be resolved and the entry cleared from your credit report.

Another option is initiating a dispute through each credit bureau individually.

Why is it important

  • It will help you achieve a better credit score

3) Work on your payment history and dispute incorrect late payment entries

Your payment history also affects your credit score significantly. Work hard to clean up any possible errors in both accounts that are currently open and those that are closed. Just like derogatory remarks, you can dispute a late payment or an incorrect entry.

Ways to remove negative items from your report

  • Submit a credit dispute letter
  • Write a letter of goodwill and request to remove the negative entry
  • Negotiate with the creditor and request for delete
  • Involve credit professionals

Why is it important

  • Credit history accounts for 15% of your FICO scores
  • Errors and incorrect payments risk your chances of getting a loan
  • Correct and accurate information is a sign of trust and financial responsibility

4) Increase your credit limits

Avoid using your maximum limit or carrying a balance that is 50% more than the credit available. That means that if you have a credit limit of $5000, you should not carry a credit of more than $2500. The ratio of the credit available to the credit used has a great impact on your score.

There are two ways you can increase your limit without waiting for your creditor to raise the limit or requesting for an increase. Note that requesting for an increase is considered as a hard inquiry, which is likely to hurt your scores.

Why is it important

  • It will reduce the percentage of funds used
  • It will lower your credit utilization ration
  • It will improve your credit score

5) Open another credit card account

Opening a new credit account automatically increases your available limit by that card’s limit. With it, you will increase your credit card utilization ratio, which will increase your overall score.

You can also get a card that does not charge an annual fee, although the interest rates will be high. The rates, however, will still be manageable if you never carry a balance.

Why is it important

  • It will improve your credit mix, which also affects credit score
  • It will give you better access to benefits, rewards, and low interest rates
  • It will increase your credit limit

6) Pay bills on time and clear outstanding balances

Free up some cash and pay your balances. This may sound unreasonable, especially if you are seeking to increase your score in order to borrow a loan. Decreasing the existing debt, however, could improve your credit scores significantly. In fact, it is the main reason why credit repair should be a long-term financial plan and not just something you do when the need arises.

Ensure that you pay your bills on time. Clearing your bills also involves choosing the bills to pay when on a tight budget. Pay creditors who are likely to report late payments to the credit bureau before those that are not listed on your reports. This will not only ensure a clean record but also increase your ratings.

Why is it important

  • It reflects proper debt management
  • Your credit limit is going to increase without the need for a hard enquiry

Does involving a credit repair company make a difference?

The power to repair your credit score is within you. Although credit repair companies could help you to initiate disputes or requesting a deletion, the results are similar to those you get when you do it yourself.

Why does it take so long to repair credit score?

Repairing the credit score takes a long time because:

  • When you clear an existing debt, the account can only be updated at the end of the billing cycle within which you paid the debt
  • It involve many parties; you, your creditor, and the credit bureaus
  • It depends with the severity of the problem. Issues like bankruptcy take more time come out of.

Conclusion

Repairing a damaged credit score is not an entirely impossible task. However, it requires time, patience, and will. As a result, clients seeking to repair their credit score should embark on it as a long-term financial plan. This way, they will improve their score without compromising their economic wellbeing.