When it comes to credit repair, there are a few DIY steps you can personally take. The benefits of improving your credit bring a higher score over time and more opportunities to advance in life.
When someone has poor credit history, obtaining a stable future can be difficult. It’s important not to take your score lightly if it’s currently less than ideal. Having poor credit can hold you back from things like approved loan applications, credit cards and many other forms of obtaining credit.
DIY credit repair can feel pretty overwhelming to take on. With step by step guides from credit repair experts at Pro Finance, we have simplified the process of improving your credit.
Step One: Obtain your Credit History
Your credit score is different from your credit report. Your credit report doesn’t include your score. With the Free Credit Reporting Act, you can DIY and get free copies of your credit reports from credit bureaus.
There are three major credit bureaus that review your credit history: Experian, Equifax and TransUnion. You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies.
You should obtain your credit reports from each of them, as they may all differentiate in information. With itemized lists they will help you understand what is fully impacting your credit score. Helping you begin the process of credit repair.
Examining Credit Reports
It’s important to go over your credit reports and ensure that all of the information listed is accurate. It will show things like open credit lines, late payments, etc. These all impact your credit score on different levels.
When taking DIY steps towards credit repair, first learn what’s affecting your score:
- Payment history– is 35% of your FICO score and shows your history of payments on credited accounts.
- Credit utilization– makes up 30% of your score and shows how much you owe in relation to your credit limit.
- Length of credit history– includes 15% of your score and is based on how long you’ve had your credit accounts open.
- Types of credit– is 10% of your score and shows the array of your open credit accounts.
- Credit inquiries– finally, this is 10% of your score. It shows the amount of inquiries made to your personal credit. Such as applications, loan agencies, etc.
Now you should have more insight on what impacts your credit score and which factors calculate into your credit history. The next step in credit repair is correcting any errors you may see in your credit reports.
Step Two: Address any Credit Errors
Fixing any mistakes on your credit report can easily be DIY’d. Known as credit repair, the correction of errors on your report may take a little time. So it’s recommended to start the process ASAP.
If any mistakes are found on your credit report, disputes must be made with the credit bureau that has made the error.
As the credit errors vary, it’s not uncommon to find a couple mistakes on your credit report. Disputes have to be filed separately, unless there are multiple mistakes on the same credit account. All account disputes also need to be filed apart from others if they’re from different credit bureaus.
In order to get a good outcome, it’s important to be very accurate with your credit dispute. If you’re using the DIY credit repair approach, make sure and do your research. Learn how to properly write a credit dispute letter before submitting your dispute.
If you’re feeling too out of your element, you can look into hiring a credit repair company for assistance in credit repair and disputes.
Step Three: Examine your Credit Utilization
So, what is credit utilization? To simplify it, take all of your active debt and subtract it from your approved credit limits. That gives you the amount of available credit left on all credit accounts.
To further put into perspective, compare your balance (how much credit you owe on an account), to the approved credit limit (revolving credit). This is how credit bureaus calculate your credit utilization rate. Not to mention, it’s the second most impactful factor on your credit report.
To show creditors that you’re capable of managing a credit limit responsibly, which means no maxing out credit cards, you want to keep your credit utilization rate under 30% use of available credit. A 10% rate is more ideal, but simply staying under 30% is more achievable for some. Especially those working on DIY credit repair. Lowering your credit utilization rate can be as simple as paying off open credit accounts. Decreasing your debt ratio available credit is important.
Step Four: Form Good Credit Habits
Your credit affects you in so many aspects of life. To save yourself from the stress of DIY credit repair, you should work on forming good credit habits over time. Give yourself financial freedom with quick loan approvals (no cosigner needed), lower interest rates and just overall saving yourself money in the future.
Having bad credit creates negative impacts on many things, such as:
- Getting denied for a home loan, low approval amount, or needing a cosigner.
- Small loan amounts on vehicles, with high interest rates. Also usually needing someone to cosign.
- Increased interest rates on already poorly limited credit accounts.
- High insurance rates.
Now, let’s talk about how to repair your credit and improve your history over time. It simply takes forming good credit habits. Let’s go over the ones we at Pro Finance recommend everyone adheres to.
Pay Off Debt
The main goal when practicing credit repair, is to pay off your debt. There are many different plans to pursue when working on debt pay off:
- Review your spending habits. Start by looking at your budget. From there, be making at least the minimum payments on any bills. Avoid any access spending. The faster you can pay off any credit cards, or loans, the better.
- Look into debt consolidation. Consolidating your debt means taking out one bigger loan, to pay off everything you owe at once. Then instead of paying on multiple accounts with varying interest rates, you only have the one.
- Reach out to credit lenders. If you’re finding it difficult to pay all of your debts on time, your credit provider might be willing to negotiate. Possibly coming to a new payment plan that is more manageable for you.
Pay on Time
This is essential to keeping your credit report from receiving any more dings. Late payments make an instant impact and if left for longer than 30 days, they’re reported to credit bureaus. What’s also important to realize, is that minimum payments are great to make on time. But that doesn’t save you from the interest rates.
We recommend paying over the minimum and enrolling in any auto pay available and keeping tabs on when certain bills are coming out of your account.
Keep Low Balances
Back to the subject of credit utilization. Keeping low credit balances has a directly positive impact on your credit score. When working on credit repair, limiting amounts spent on credit accounts may help. You should never rack up more credit than you can afford to pay off in the future.
When first starting on the DIY credit repair journey, we recommend first paying off all debt, then after forming and sticking to good credit habits, start to build new credit with those building blocks in place. Self control to credit spending is crucial to credit repair.
Step Five: Seek Assistance from a Credit Repair Company
When doing DIY credit repair, sometimes individuals can only achieve so much. If you’ve applied all above steps to repairing your own credit and are seeing no results, it may be time to look further for help.
At Pro Finance, we dispute and work with all creditors. So you don’t have to! Considering some creditors don’t acknowledge borrowers as important, that’s where we step in and get you faster results. When you go through a professional financial company, creditors take the process more seriously and we get you through disputes and other problems quicker.
We don’t take being a credit repair company lightly at Pro Finance. Getting you results and along with our credit repair tips, we improve both personal and business credit. The first step is letting us evaluate your credit reports and then we take it from there. You don’t always have to DIY, let the experts help you with credit repair.