Often times, you find out about your bad credit at the worst possible time. Such rude shocks are normally an unpleasant surprise. You apply for a credit card or a small loan, and the financial institution turns you down citing bad credit. It can be frustrating because you may be in a situation where you really need to purchase a new car via an auto loan.
When faced with this kind of a situation, the first natural question on your mind would be “why is my credit report bad” or “what item within my credit report is making my record bad”. So, you order your copy of credit report from either of the three biggest credit bureaus in the nation, Experian, Equifax, and TransUnion. As you go through the various items on your credit report, you might notice that most of the times, the bad credit occurs due to a few items on the credit report. At times, you may not fully understand what all the items on the report mean. You would have to do some research in order to really understand what each item on a credit report is and how it impacts your credit score.
History of making timely payments is a big part of any credit report. It essentially tracks how regularly and promptly you pay your monthly bills. Whether it is credit card bills or cell phone bills, are you paying them on time and in full amount? This component of payment history affects roughly 35% of your final credit score. It is a significant factor worth paying attention to.
Next, the total debt held by you is a big factor. It accounts for almost 30% of your credit report. It measures what kind of debts you have and more importantly what amount. Credit card debt, education loan, auto loan, payday loan, etc. are all factored in. If you are close to the maximum borrowing limit on your credit card, then that is also a negative sign as far as credit score impact is concerned. The mix of debt is also critical when it comes to credit reports. Credit card debt and payday loans are not viewed as favorably as an education loan or a loan backed with a real asset.
The credit report also takes into account the timeline and longevity of your financial history. The longer you have a history, the better it is for your credit score. Use a credit card occasionally just to build up some financial history. Make monthly payments to get that data on record.
Lastly, whenever a credit report is sought for sanctioning of any loan, you lose points. So, do not regularly keep applying for new credit cards, or new loans. If you are going to do it, then make all the applications within the span of a couple of weeks. That way, you will lose points only once. If you keep doing it every few months or so, then every inquiry will result in a loss of points. Seeking regular loans is a negative factor for the credit score.
Some specific situations that will negatively impact your credit score are:
Now that you have a good idea of what items to watch out for in your credit report, the next step is to try and identify any discrepancies on your report. The first thing to watch out for is personal information. Is your name on the report, are all items related to you, or are they someone else’s records and transactions? Sometimes, a fraudulent account may have been opened in your name. That could be affecting your credit score. Flag such items immediately. Examine credit lines to identify such unknown fraudulent accounts. Check all other transactions to see if any late payments are present. As outlined above, late payments are a major cause for bad credit. You must carry out this audit on credit reports of all the three major credit bureaus. This is important because one credit agency may have missed something which the other has not. Some amount of time and effort is required, but you can do the above steps yourself without going to any professional expert. However, if you are feeling overwhelmed and see the need to approach professional help, Dedebt has a team of experts who can guide you with credit repairing. Feel free to fill out the form below or call us for more details.
If you do find inaccuracies or discrepancies in your credit report, then bring them up with the credit bureaus. Do not wait thinking that those items will go away in a few years and everything will be fine. Thousands of normal average people successfully dispute discrepancies on their credit reports every day. All you need to do after identifying the inaccuracy is to write a letter to the credit bureau.
There are few things that you should know before you begin writing a certified letter to credit bureaus. By following certain guidelines, you can make sure that your letter will improve the success rate of getting your credit report fixed. Below are some tips that will help you write strong and professional credit repair letters:
Besides writing a credit repair request letter, there are some things that you can do to repair your credit. You can do these things yourself and you may not need any professional help.You can do the following:
If you are going to pay off any outstanding loan, get a written statement from the lender or collection agency. Otherwise, they can simply deny that you have made the re-payment even when you have.
If you settle with a lender for an amount lower than the original amount of the debt, the difference between the two is treated as income, and that may affect your income taxes. Consult your accountant or tax expert to understand the implications.
Dedebt has a team of professionals who have experience in repairing credit for consumers across the country. Feel free to call us or fill out the form below to know more about how you can get your credit repaired.