In our last post, we gave you the first three steps to repairing your credit. Let’s jump right in and continue…with one of the most involved steps in the process. It may take a little work, but with this helpful guide, it isn’t as difficult as you would think.
Dispute Errors on Your Credit Report
Once you’ve identified the potential mistakes on your credit report, you need to correct as many as possible. When you order your credit report, you usually receive instructions on how to file disputes. Disputes can be filed online, by phone or by mail. Filing online is the most efficient method, but filing by mail has the advantage of leaving a paper trail you can follow. It also allows you to attach copies of supporting documentation such as cancelled checks, letters or statements showing payments on the account. Never send original materials to dispute elements on your credit reports; always make copies.
When you send your dispute via certified mail – which is highly recommended – you also have proof of the date the dispute was mailed. This is important, because creditors have 30-45 days to respond to dispute filings. If you’ll be filing multiple disputes, create a credit report dispute template on your computer that you can change for send for various disputes to different credit bureaus. Always include a copy of your credit report highlighting the entry you’re addressing.
Even if there is more than one dispute you’d like to open on your credit report, it’s best to send in your dispute paperwork individually. Always send disputes in one at a time. You should also let a bit of time go by between each dispute you open. If you send in too many disputes at once, your petitions could be considered frivolous.
You can also send disputes directly to the bank or business who listed the negative information on your credit report. Legally, they have the same responsibility as the credit bureaus to review and investigate your claims.
If your dispute is successful, the credit bureaus will update your credit report with the new information, update the other credit bureaus and send you a new copy of your credit report. If your petition is not successful, your report will be updated to indicate that you’ve disputed the claim. You will have the chance to add a personal statement to your credit report. These statements won’t boost your credit score, but can help a lender make a more informed decision when they review your credit report.
Attack Past Due Accounts
More than anything else, settling past due accounts will improve your credit score. 35% of your credit score is related to your payment history.
Your first move should be to salvage what is savable. Bring accounts that are past due but have not yet been charged off, closed or sent to a collection agency current as quickly as you can. If you are only 30 to 90 days behind on accounts, try to bring them up to date immediately. These short lapses, while undesirable, can usually be explained and remedied with a letter and a check. Charge offs are much more serious. Once an account is more than 180 days past due, it is considered to be a charge off.
You may still have the opportunity to take care of an account in the later stages prior to charge off if you contact the lender and agree to pay off the total amount due. They may want it all up front, or may put you on an accelerated payback plan at a much higher payment than the minimum due that you weren’t sending. Be prepared to honor the agreement made in order to try to save the account from collections.
Even if an account has been charged off, it is important to make arrangements to pay the amount due and clear the debt to zero. The older charge offs are, the less they affect your overall credit score, but the outstanding balances still cause significant concern to future lenders. Again, it’s worth your while to call the creditor and try to arrange a payment plan or negotiate a partial payment as full settlement of the debt. Once the charge off has been paid in full the zero balance will be updated on your credit report. For seven years, the charge off or negotiated settlement will continue to appear on your credit report. For accounts in collections, you will approach your payment strategy in much the same way as you would for a charge off. As with charge offs, resolved collection accounts will continue to be reported for seven years.
Re-establish Your Credit Worthiness
If you can save most or all of your current credit accounts, treat them with kid gloves. Make reasonable purchases and pay them off during the first billing cycle. If you must carry a balance, make sure you clear it within two to three months at the most. If your accounts have been closed, seek new lines of credit. Retail or secured cards are often good choices. Retail organizations such as department stores or chain stores are often more forgiving when they’re reviewing credit history. Secured cards can be used in more places, but require that you make a deposit with the issuer for the amount of your credit limit.
As you build your credit history again with several months of reliable payments, you can think about a standard general use credit card…and eventually a mortgage lender!