How To Repair Bad Credit – Tips on Regaining Financial Health
A bad credit rating can cost you financial losses of up to thousands of dollars due to high interest rate payments on your loans and credit cards. Here are some tips on how to repair bad credit and improve your financial health.
Obtain a copy of your credit reports from the three consumer reporting agencies: Equifax, Experian, and TransUnion. These three have a centralized website, annualcreditreport.com, where you can avail of your credit reports for free once every 12 months. You may also get these reports for free if in the past 60 days you experienced adverse action regarding your credit, such as a loan denial.
It is important to assess the information on your credit reports for accuracy. Any inaccurate negative items should be disputed with the three credit bureaus as these would unfairly pull down your credit score. Some common inaccuracies deal with duplicate charges or balances attributable to identity theft. According to the Fair Credit Reporting Act, you have the right to demand accuracy on the information being reported on you and it is the responsibility of both the credit bureaus and your creditors and collectors to ensure that your rights are not being transgressed. The credit bureaus are legally obligated to investigate your disputed items within 30 days. If they fail to verify the items within that time frame, then, they are duty bound to correct or erase the disputed inaccurate information.
Most of the negative items on your credit report would usually be about late payments on your bills. Repairing bad credit would likewise entail rehabilitating your bad debt payment habits. You have to have a system that would effectively help you keep track of your bills and payment due dates. You also have to ensure that you are living within your budget and that you took your credit payments into consideration when you calculated your budget.
Another credit rehabilitation behavior that you can aim for is to reduce your total debt-to-total credit limit ratio. The ideal credit utilization ratio is only about a third of your credit limit. If your ratio is way beyond that ideal, you can pay off some of your balances to bring this ratio down and boost your credit score.
