Start by Knowing What to Fix
Without knowing where you are, you won't know where to go. The first order of business is to get a copy of your credit report.
Luckily, ordering a copy of your credit report is easy. You are legally entitled to one free copy of your credit report from each credit bureau every 12 months. You'll need to provide some basic information to confirm your identity, and then you'll be able to view your credit report and any negative items listed on it. The information that appears on each report can be very different, so it's not sufficient to get a report from only one bureau.
If you want your credit score, you'll have to pay to get it, but knowing that exact number (which can vary greatly depending on what credit bureau is reporting it) is not as important as having a list of all of the negative items that led to your score. This list of items will become your "to-do" list for credit repair. You DON"T NEED your credit score to fix the credit report.
So, what are you looking for when you scan your credit report? It should be pretty obvious. Anything that's labeled "derogatory" isn't good, but in the credit world there's bad, fairly bad and really bad when it comes to negative items.
Bad: late payments
If you've made late payments you're certainly aware of it, and you probably know that not getting your bills in on time doesn't do your credit any favors. The more recent the payment, the greater the damage, and the more late payments you have, the bigger the impact. A bunch of late payments at one time will be a red flag to creditors that you could be in a financial tailspin. On the other hand, the impact of late payments lessens over time, and a couple of late payments from a few years back won't drastically affect your score.
Fairly Bad: charge offs and collections accounts
If a charge off appears on your credit report, this means that even though you still owe the debt, your creditors have given up on ever getting payment from you. In other words, they have written off the debt and may have sold it for pennies on the dollar to a collection agency. Thus, the same amount representing one debt might appear both as a charge off listing and a collections item. These are definitely bad for your credit and should be on the top of your list for credit repair.
Really Bad: foreclosure, repossession and bankruptcy
All of these are devastating in terms of the impact on your life. If you've experienced any of these events, you may still be recovering both emotionally and financially. The bad news is that foreclosure, repossession and bankruptcy will continue to haunt you for years after the actual event. Any of these items on your credit report will have a disastrous effect on your credit score, and can remain for 7-10 years if they're not removed. In the meantime, you probably have difficulty securing any credit, and if you can, the interest rate will likely be astronomical.
Now that you're able to interpret your credit score and know the culprits behind your bad credit, you're probably feeling even more overwhelmed than when you started... but you can't fix your bad credit until you know what's standing between you and a better credit score. Now that you know exactly what's causing your bad credit, and have completed Step One (which is what you're reading now) here's Step Two: Fix Credit Score. You have several options when it comes to credit repair
Information provided by Lexington Law
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Copyright © Ron Pippin 2016. NMLS 218333 All rights reserved
Loan Officer with Citywide Home Loans, a Utah Corp. and its licensors. NMLS#67180. Regulated by the Division of Real Estate. NMLS#67180.