10 Steps to Getting Your Credit Back on Track PART I

so credit is a tricky beast. Its a part of more parts of our lives than most people realize. Insurance companies set our premiums based on our credit, jobs may decide not to hire us if they aren’t impressed by our credit. It envelops our day-to-day and we need it to really shine sometimes.

But what if your credit doesn’t shine? What if your credit sucks, or it isn’t terrible, but comes in short for a big purchase like a home or vehicle? You can fix your credit! I will help you to get back on track.

I will include TEN steps here, and then will circle back in a later blog post with anything I’ve forgotten.

1. Print out your credit report! Don’t pay anyone for it either. Go to IRS.gov if you’re in the U.S and there”s usually a link right on the home page, but if its MIA, just use the search feature. I usually do not print all three bureaus at once. Each copy from the three bureaus is free once a year, so I print out one every four months. If you feel like something is missing, check another bureau sooner rather than later. Also, many credit cards let you check your credit free regularly. This wont give you as detailed information, but it will let you know right away if something is amiss.
2. If you don’t have credit, get a card. If everyone turns you down, get a secured card (you put $ on this in advance, and that is your limit). This won’t give you money if you’re in a pinch, but it WILL help you to build credit where there was none. After a year, apply for a regular credit card with a company that has decent reviews, and build from there.
3. Call your creditors. If you haven’t paid something in a few months, for whatever reason, and it hasn’t yet charged off, call your creditors. Tell then what you CAN afford, and pay them. Most have options to make smaller payments while still incurring late fees, until you are caught up. This can help you to buy some time and not kill your credit altogether.
4. Look at your credit card. If you used to have a history or bad credit, but you’re doing better now, check your credit report and see when the old stuff falls off. Since biblical times, most debts are forgiven after seven years (this does not apply to student loans, sorry). The last thing you want to do is pay something thats leaving your credit report in a couple months, when you’re struggling to make ends meet with your current bills, and also, don’t get on payment plans or even answer or call back creditors that aren’t on your credit report. Collection agencies can buy old debts…. like ten-years-old… things that could have left your credit report years before, and they buy your debt for a fraction of a dollar and prey on people to pay off the debt… debt that’s long since gone. Block some numbers, or tell them you’re not talking to them and as not a primary creditor (the company you acquired the debt through, originally), you can tell them you don’t have a debt with them, and tell them they are legally not allowed to call again since you are asking them not to. Do NOT acknowledge the debt. Do not ask about payment plans unless the debt is something still on your report that will be there for a long while. Getting on a plan will put this BACK ON YOUR CREDIT REPORT! Don’t do it!
5. When I was nineteen I had twelve credit cards. I paid them all the time, and then I saw this add on TV to consolidate your bills to make one big bill. It sounded convenient. I didn’t know it was bad, I didn’t know that it was called credit counseling or that it would kill my credit and simultaneously close ALL of my credit accounts…. but it DID. Don’t do credit counseling. Call your creditors, let them know you are planning on paying them. Write don’t what you can afford and plan according to that. Don’t consolidate and don’t take out high interest loans either. Both will strip you of flexibility in the future.
6. Pay the highest interest debtors down first. Pay minimums for everything, but ANY extra money should go to the highest interest debtors first. Once those pay don’t move on to the next highest until you don’t have anything remaining.
7. Do not cancel your oldest accounts. If they’re the highest interest cards, pay them off and spend $10 a month with them for a treat or gas or whatever, and then pay that $10 off every month. Oldest credit account is on your credit report, so closing a ten-year-old account when your next most recent in five-years-old will ding you.
8. Contest incorrect information! I’ve done this so many times. Credit reports inevitably have something damning on them that you didn’t incur yourself. If you go the IRS route or even the credit card app route to see your credit report, you can generally to a spot where you click on the misinformation and write a note to the bureaus explaining why the information is inaccurate. Sometimes it comes off, sometimes it doesn’t, but it can’t hurt to try and if it works out, could mean a nice boost for your credit.
9. Pay your bills on time, everytime. Plan your month out. most credit accounts, whether for cards or cars, have some days you can go where you’re late and you get the late fee, but you don’t have a late payment showing up on your credit report. I recommend paying everything you can without incurring a late fee, because they can eat up all of your money, and then make sure everything is paid within the grace period.
10. Keep your total debt under 20% of the amount available to you! Don’t use all of your credit! This money may be a safety net, but don’t buy anything on credit that you don’t really need, because available credit counts! If you can’t pay it with cash, and its not a bill, or something pressing, leave it!