Quick Guide to Credit Disputes
Facing the realities of having poor credit can be overwhelming and stressful for anyone. But even if your credit score has been negatively affected by activities like missed mortgage or car payments, or even a bankruptcy or lawsuit, there are still steps you can take improve your credit and regain your financial footing. Here are some tips on repairing your bad credit and improving your credit reports.
Pay down revolving accounts
If you have a high balance on a credit card and are only making minimum payments, start paying down the balance. It's important to pay down (or even better, pay off) revolving accounts such as credit cards. This will lower your credit-to-debt ratio (what you have borrowed in relation to what you could borrow), and is one way to improve your credit score.
Paying off installment loans such as auto loans, student loans, etc. won't improve your credit score as dramatically, if at all.
Bottom line: Pay down your credit card balances to less than 30% of their available credit.
Manage accounts, balances and credit limits
Once you've paid down the balance of your credit cards, keep your spending on these accounts down. You should aim for a balance that is less than 30% of your credit limit on the card. Do NOT voluntarily lower credit limits as you would then need to pay them down even more. You can effectively get to that 30% by asking your credit card company for a credit limit increase. Again, don't increase your spending when you get an increase as you want to maintain a balance of 30% or less of the available credit line.
If your credit report doesn't reflect your actual credit limit, make sure your credit card company updates this information with the credit bureaus. In addition to limiting your spending on the accounts you already have, be cautious when any new accounts and don't cancel any old accounts since these help your credit score by demonstrating a longer credit history.
Dispute Inaccurate & Negative Items
Dispute any negative items on your credit report that aren't yours or are otherwise reported incorrectly. Whether the incorrect information is due to an accounting or clerical mistake, or a misunderstanding with a business or lender, errors on your credit report can have a negative impact on your credit. These could include late payments, charge-offs or collections errors that shouldn't be on your report. You can do this by requesting verification, and if the items cannot be verified, the credit bureaus have to remove them. If items older than seven years (10 years for bankruptcy) have not automatically been removed from your report, you can request that the credit bureaus delete them.
Under the federal Fair Credit Reporting Act (FCRA), credit reporting agencies like Equifax, Experian, and TransUnion are responsible for correcting information on your credit report that is inaccurate or outdated.
The next step in disputing errors in your credit report is to notify the credit reporting agencies in writing of the specific information you have identified as outdated, incomplete, or simply incorrect. Before mailing your letter, make sure to also include copies of any supporting documentation, along with detailed explanations on the reasons for your dispute. The Federal Trade Commission recommends sending a copy of your credit report that shows items you are disputing either circled or highlighted. It's also a good idea to make copies of your letter and all additional documentation before you mail it. In addition, the FTC advises consumers to send their disputes via certified mail and to request a receipt. Taking this extra step will let you know when your letter and other important materials are received by the credit reporting agencies.
By law, credit reporting agencies are required to investigate claims within 30 days of receiving a dispute. But be aware, these agencies can and do decide some disputes or claims are too frivolous to investigate.
Negotiate with your creditors
Although this option may sound intimidating, communicating with your creditors can actually be a beneficial step in the process of repairing your credit. Most creditors prefer to help consumers pay their balances instead of having them default on their loans or credit card payments. In addition, creditors may be willing to remove negative listings they have added to your credit reports in exchange for payment.
Since the economic recession is affecting record numbers of people from many financial backgrounds throughout the country, creditors may be even more receptive to helping you establish a payment plan that can help you address your debt while making ends meet.
Some credit card companies may also offer you the chance to settle your account in one payment at a significantly reduced fraction of the original balance.
Undoubtedly, it is better for your credit to contact your creditors and advise them of the difficulties you are having making your regularly scheduled payments. By doing nothing, you risk having your account sent to a debt collecting agency. In addition to the inconvenience of receiving regular phone calls and letters, having accounts in collection status can have serious negative effects on your credit.
Seek professional credit repair services
Even with all the resources available to assist consumers with their credit, fixing poor credit can be a complex, lengthy and stressful situation. Professional credit repair services can guide you through the process of understanding your credit report while offering valuable knowledge and resources to help get your credit back on track.
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.