Best steps to fixing low credit score

Protecting your credit rating is one of the most important things you can do in life. Without a good credit rating you will have trouble buying houses, cars and even obtaining some jobs. Many factors affect credit ratings including late payments, loan defaults and bankruptcy. The loss of a job, severe medical problems and other factors can interfere with your ability to pay bills and cause your credit rating to take a nosedive.

Step 1

Start early. The time to start fixing your credit score is not after you put an offer in on the house of your dreams and have to locate financing. If your credit scores need to be repaired you should focus on getting it done before attempting to make any credit purchases and setting yourself up for disappointment. Repairing your credit 6-12 months before you actually need to use it will help convince lenders you have gotten a handle on your budget and finances.

Step 2

Request a credit report from Equifax, Experian or Transunion. Before you can improve your credit rating you need to know what is on your credit report. There could be entries on there that are not yours, and simply getting those items removed will send your scores back up the ladder. Even if the negative items on the report are accurate, you will need to get a credit report so you can see any and all problems that will need to be addressed.

Step 3

Dispute and correct all issues. You need to dispute in writing any negative items on your report that you do not believe are your debts. The agency must then prove that the debt indeed belongs to you, and if it cannot offer that evidence to you, it must remove the item from your credit report. Once that is complete, you should contact each remaining negative entry and ask what you need to do to get it cleared and removed. You will need to pay the bills off but before sending any money ask for a promise, in writing, that paying the debt will result in the negative item being removed from your credit report.

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Step 4

Offer a settlement for a discount on the debt. In many cases, if you offer the company in question a settlement payment that is less than the actual owed amount, it will accept your offer to get the debt off the books. Take notes including who you spoke with, what was discussed and what the outcome of the call was. In addition, record the date and time the call took place. Before hanging up, go over the agreement with the party and ask if you understand it correctly. Note that in your records as well.

Step 5

Get a secured credit card. While working to remove negative entries, you need to start gathering positive entries on the same report. This can be done by getting a secured credit card. A secured card allows you to have a credit limit equal to a savings account amount that you establish with the card issuing company. Be very careful to only use the card once or twice a month and pay off the balance before the due date. The company will report to the credit agencies and in most cases there will be nothing on the report about it being a secured credit card.

Step 6

Pay bills on time. Some negative items, such as things that have gone into collection will not be removed from your report simply by paying them; however, if you start paying bills on time now and stay current with every bill in the future, those negative items will fall farther back in time. This will show potential lenders that you have corrected any issues that prevented you from being fiscally responsible and now have a handle on your budget and finances. With each passing month and year that you pay your bills on time, you will improve your credit score and increase your ability to obtain a home or car loan.

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