Repairing a Low Credit Score

There are a couple points to make at the outset.  First, there are no easy fix, fast track methods to repairing and rebuilding poor credit.  It… just… takes… time.  Remember your credit score (and report) reveal your track record of managing payments.  If your score is a consequence of your actions, time is how your score will be repaired.  You didn’t drop to a low score overnight, even if “life” did happen (job loss, health problems, divorce, etc.).  This situation took time.  Don’t expect to bounce back to a 780 score overnight.  You need time to prove your ability to manage your finances and to pay expenses responsibly. 

The second point is to avoid unscrupulous credit repair service companies.  These companies often prey upon unsuspecting consumers promising to “fix” someone’s credit and to remove unfavorable information for “3 easy payments of $49.95”.  Nothing could be farther from the truth.  While errors on reports are not uncommon, truthful information no matter how unsavory cannot be removed.  If a bankruptcy or foreclosure happened, it will be reported and will be there for some time.  If you have a credit score, you are an adult.  Let’s not whine about a low score, let’s be proactive and start on a better path.  (If you have not reviewed your credit report in some time, visit http://www.annualcreditreport.com/ where you can receive a free report with your current scores once every 12 months.)

Okay, so you are behaving.  Your bills are paid as promised, you have a very low debt to income ratio, manage your money well and stick to your budget, and learn your credit score is not where you expected it to be.  Now what??

Start by reading your credit report.  Is the information listed correct?  Many times a keystroke error is all it takes to suddenly combine someone else’s credit history to yours and negatively affect your score.  If you are a “Jr.” or “Sr.” you can certainly understand this scenario.  Other times it may be that a debt has been fully paid and the creditor has stopped reporting the information to the credit bureaus so that a remaining balance still shows. 

If you believe your credit report contains an error you have the right to contact the credit bureau that reported it and dispute the information.  There is no cost to dispute this information and it isn’t complicated.  The best way to communicate with any credit bureau is in writing.  (Our website contains a sample dispute letter you can use.)  Provide your complete name and address, the item(s) in question, why the item is being disputed, and your request to have this corrected or removed.  Include a copy (never the original) of the documentation you have supporting your claim and a copy of your credit report with the items in question circled.  Keep a separate copy of everything you are sending to the bureau along with a diary of any activity, conversations and contacts. 

The reporting credit bureau has 30 days to investigate the disputed information and provide you with a written report of the findings.  The bureau is also required to send you a copy of your updated credit report if the disputed item has been changed as a result.

In general with time, a solid financial plan, and some perseverance you can repair, build and maintain your own credit standing.

What exactly is a Credit Score? (part 4)

This is the last post from this series on your credit score.  To review, we discussed what information was on your credit report, contributing factors to your score, and how to build and maintain a strong credit score.  This post will highlight ways to repair a damaged credit score.

Part 4 – How can I repair a low credit score?

There are a couple points I must make at the outset.  First, there are no easy fix, fast track methods to repairing and rebuilding poor credit.  It… just… takes… time.  Remember your credit score (and report) reveal your track record of managing payments.  If your score is a consequence of your actions, time is how your score will be repaired.  You didn’t drop to a low score overnight, even if “life” did happen (job loss, health problems, divorce, etc.).  This situation took time.  Don’t expect to bounce back to a 780 score overnight.  You need time to prove your ability to manage your finances and to pay expenses responsibly. 

The second point is to avoid unscrupulous credit repair service companies.  These companies often prey upon unsuspecting consumers promising to “fix” someone’s credit and to remove unfavorable information for “3 easy payments of $49.95”.  Nothing could be farther from the truth.  While errors are not uncommon on reports (we’ll discuss this in a moment) truthful information, no matter how unsavory, cannot be removed from your report.  (For information on fraudulent credit repair services, what to avoid and how to report illegal activity visit our website for more information.)  If a bankruptcy or foreclosure happened, it will be reported and will be there for some time.  If you have a credit score, you are an adult.  Let’s not whine about a low score, let’s be proactive and start on a better path. 

Okay, so you are behaving.  Your bills are paid as promised, have a very low debt to income ratio, manage your money well and stick to your budget, and learn your credit score is not where you expected it to be.  Now what??

Start by reading your credit report.  Are the creditors listed, those you actually have or have had accounts with?  Are your name and aliases correct?  Are your date of birth, social security number and address(es) correct?  Many times a keystroke error is all it takes to suddenly combine someone else’s credit history to yours and negatively affect your score.  If you are a “Jr.” or “Sr.” you can certainly understand this scenario.  Other times it may be that a debt has been fully paid and the creditor has stopped reporting the information to the credit bureaus so that a remaining balance still shows.  Surprising as it may sound, even with all the computer systems in the world, credit reports are ultimately managed by people capable of making mistakes.  (No really.)

If you believe your credit report contains an error you have the right to contact the credit bureau that reported it and dispute the information.  There is no cost to dispute this information and it isn’t complicated.  The best way to communicate with any credit bureau is in writing (go old school here) with the letter sent by registered mail with a return receipt to confirm they now have your letter.  (Our website contains a sample dispute letter you can use.)  Provide your complete name and address, clearly identify the item(s) in question, explain why the item is being disputed, and your request to have this corrected or removed.  Include a copy (never the original) of the documentation you have supporting your claim.  (For example, if you paid off that credit card, include a copy of the final statement showing a $0 balance.)  Also include a copy of your credit report with the items in question circled.  Keep a separate copy of everything you are sending to the bureau along with a diary of any activity, conversations and contacts. 

The reporting credit bureau has 30 days to investigate the disputed information and provide you with a written report of the findings.  The bureau is also required to send you a copy of your updated credit report if the disputed item has been changed as a result.

In general with time, a solid financial plan, and some perseverance you can repair, build and maintain your own credit standing.