According to FoxBusiness.com, nearly one-third of Americans have bad credit. Bad credit is anything under a 601, based on the fact that most credit score scales range from 300-850. Additional research provided by Experian states that this figure is just a snapshot of where people, on average, are in regard to their credit reports.
If this sounds like you, don’t freak out. It is possible to fix your credit report and fix your score in the process. If the idea seems stressful or overwhelming, don’t worry. We have laid out the following steps to help you navigate the process and get you on the way to a better credit report.
Figure out where you stand financially
Before you do anything, figure out where you stand financially. I stress this because if you don’t know where you’re starting from, you’re not going to know what resources you have. These resources will be critical when starting your journey to fixing your credit report.
Sit down and review all of your financial accounts and statements. Take inventory of the amounts currently kept in your checking and savings accounts, along with any other areas you might store cash. I have a cup on my bookshelf I’ll occasionally save money in, as well as both Venmo and PayPal accounts. Make a note of regular flows of income, such as paychecks and other income streams. Also list any debts you are currently paying, such as a credit card debt or a car loan.
Next, examine your cash flow and bills. Where is the majority of your money going? By pulling up your bank statements, you can assess if you have any repeated purchases. If you can’t quickly tell where your cash is going, try tracking software available to you for free, such as Mint or Personal Capital.
Financial apps and tracking software allow you to link various financial accounts together so you can look at your finances in one snapshot.
Not only can you add a checking or savings account, you can also add your retirement, credit cards or any debt you may owe. Looking at your finances collectively instead of individually can tell you where you stand financially much faster.
If that seems too overwhelming, try using a pen and piece of paper.
Tracking your spending will give you an idea of what activities and habits you’re currently supporting with your hard-earned cash.
Request a free credit report
After you have taken note of where you stand financially, pull your free credit report. All three credit bureaus allow you to pull your credit report for free once per year. Annual Credit Report is a reputable website that will assist you in recovering information in regard to your credit report and score. Print a hard copy of the report so you can highlight sections and take notes as needed.
Make a list of anything that looks suspicious so that you can contact the credit bureau later on and possibly contest it if the information reported on your behalf is inaccurate.
Go over the credit report with a fine-tooth comb and look at all accounts that have been reported to the credit bureaus in your name. Are they accurate? Do you remember the time of this financial transaction? Does it make sense for this to be on there or is there some mistake?
Petition anything inaccurate on your report
If you have found something that is inaccurate or false, you have the right to petition it. The first step to petition inaccuracies is to write a letter to the reporting credit bureau, stating your case. The letter should be professional, to the point, and include your reasoning based on facts regarding your account. Include any copies of proof you have, such as receipts of paid bills, times that you have contacted the business or agency in question, and anything else that may help prove your case.
Once your claim is received, the credit bureau will contact the agency you are reporting within 30 days and get back to you with their decision made on the matter. It may result in the dispute being dismissed or require further action on your part. For additional resources, there is information listed on the Federal Trade Commission website. The Federal Trade Commission explains step-by-step how to dispute any inaccuracies on your credit report, complete with sample letters and a checklist.
Don’t be afraid to question anything that doesn’t seem right to you.
Upon further research, one of the claims against me was from when I was 15 years old. My father didn’t pay my medical bills, and a collection agency ended up going after me for it several years later. I followed the steps above, and they were dismissed. But they wouldn’t have been if I had just accepted it.
Catch up on delinquent and owed accounts
Once you have settled any inaccuracies, now is the time to catch up on any delinquent and owed accounts that rightfully belong to you. Based on the information you gathered earlier of where you’re at financially, make a budget. See where you can cut any expenses.
Any expense you can trim down will free up money for debt repayment. This will help you fix past mistakes that are still haunting you.
Call the lender or agency that is currently holding your debt to inform them you are trying to fix your financial situation and would like to discuss a payment plan so you both can move on. Collectors will be happy to work with you because they want their money and finally have you in a position to pay for it. If applicable, see if they will accept a settlement to forgive part of the debt instead.
Most of the time, collectors are happy to take the cash off your hands and waive the rest. If this is a route you choose to take, make sure you have the collection agency draw up an agreement and email it to you. Make sure you have this agreement before handing over your payment. Having written proof of an accepted settlement will protect you later on if it does not come off your credit report.
If a settlement is not an option, make a payment plan. Be realistic about the amount you can pay along with when the collection agency can expect to receive it. Treat your payment arrangement just as you would any other bill. If you do not follow your agreement, the collection agency has the right to terminate your payment plan and request the bill be paid in full moving forward.
Keep current accounts as healthy as possible
Once you have done damage control, do your best not to get stuck there again. Make sure all bills and loans you currently have are always paid on time and in full. Follow your budget to help ensure that you are living within your means.
Try not max out any current credit cards you have now and keep your credit utilization down to 30% or lower. And don’t borrow any money you can’t afford to pay back.
If you are having a hard time making sure your payments are current, ask yourself why. If you need reminders, set them on your phone or put them on a calendar. Staying organized can help you avoid late fees. You can also remain on track meeting your financial goals by consolidating your debts into a personal loan or balance transfer credit cards with a long 0% APR period. One monthly payment is easier to remember than numerous ones.
If the reason is cash flow, reconsider your expenses. Is there anything you missed in your budget that can be cut or lowered? Consider alternative ways to save money, such as taking in a roommate, taking public transportation, or cutting cable. If you’re up for a raise, now is the time to inquire about it. And if that fails, maybe it’s time to clean up your resume and take your talent elsewhere.
Remember your rights
Remember, even as a consumer, you always have rights. At your request, debt collectors may not contact you at work or by phone if you do not want them to. Due to the Fair Debt Collection Practices Act, such behaviors such as intimidation, giving false statements and countless others are now illegal.
If you feel unfairly treated, or harassed by a debt collector, you can always report them to the bureau.
You can also make sure the bureau has copies of petitions you have submitted to attach to a claim that you were unable to dismiss. Maybe they weren’t successfully removed, but you can still share your side of the story. That will help you raise your chances of getting approved when you apply for a new line of credit or loan.
The bottom line
Fixing your credit report doesn’t have to sound overwhelming. By examining your credit report, you can see where your score is and any collections or delinquent accounts you may have. You can also research any inaccuracies that have been reported and petition to have them removed. Removing any errors will fix your report faster and help you move towards a higher credit score.
By assessing where you are financially, you can build an action plan to help you get out of debt and move on from financial mistakes. Earning additional income or cutting expenses can help you move the needle even faster on your debt journey.
Fixing your credit report may not be easy, but it’s worth it. Hang in there and most importantly, don’t give up.