You may be thinking how to increase your credit if it isn’t as excellent as you’d like it to be. This may need the usage of expert credit restoration services in some cases. As previously indicated, using a credit repair firm is usually not worth it.
That’s not to suggest they can’t be beneficial; they can’t do anything you can’t do yourself, and their services aren’t free or guaranteed. Credit repair, like debt settlement, comes in professional and do-it-yourself (DIY) varieties. The do-it- yourself technique is more cost-effective and safer. With that in mind, let’s look at several alternatives to using a credit repair firm to fix your credit. We’ll also discuss various strategies to avoid.
BACKGROUND:
Before undertaking any credit repair, make sure you’re conversant with the credit environment. To refresh your recollection, “credit” is comprised of two components: your credit report and your credit score. Your credit score is calculated using an algorithm that evaluates the information in your credit report.
As a consequence, you’ll be striving to enhance the information on your credit report so that you can increase your credit score. This graphic has been published several times, but bear in mind that these are the factors that the FICO scoring algorithm uses to calculate your credit score. Because your credit score is reliant on it, your first move should be to analyze your credit report.
It’s a good idea to receive your credit report from all three main credit reporting bureaus:
TransUnion, Equifax, and Experian, if you’re seeking to resolve an existing credit problem, because each one may contain different information. If you’re simply attempting to keep your credit in excellent form, reviewing your report from one bureau every four months, which you can do for free at annualcreditreport.com, could be a smart idea.
Due to the deadly virus, AnnualCreditReport.com has made pulling your credit report weekly from all three credit agencies free until April 2021, allowing users to remain on top of their credit reports and keep an eye out for any identity theft or fraud. You may begin working on increasing the various components of your credit score after you get your credit report.
DISPUTE MISINFORMATION:
If something looks to be wrong on your credit report, you have the ability to dispute it and have it deleted. The important thing to remember is that the data must be inaccurate, not merely negative. You cannot erase factual but unfavorable information from a credit report legally or permanently on your own.
When it comes to challenging erroneous information, you have a few alternatives. The three main credit bureaus have established online dispute mechanisms. You can launch a dispute by clicking on the following links
- TransUnion disputes
- Equifax disputes
- Experian disputes
The Federal Trade Commission, on the other hand, advises that you file a complaint in writing. This might have some benefits in terms of creating a clear paper trail for your case. You can also use the FTC’s letter of disagreement template. Regardless of how you file a complaint, make sure you save copies of all correspondence and that the agency responds to your complaint within 30 days.
SUBMIT GOODWILL LETTERS:
Information that is both factual and unfavorable might hurt your credit score. In that circumstance, you have no case against the bureaus because it is their obligation to report accurate information given by creditors. Instead, you’ll have to wait for the negative information on your report to go away after a certain amount of time has passed (usually seven years).
You might, however, approach the creditor and ask for forgiveness. If it appears to be a long shot, it most likely is! But it never hurts to try, and in certain circumstances, this strategy can work. This petition to the creditor might be made in the form of a goodwill letter. In a goodwill letter, you ask a creditor to remove negative information from your credit report. You will have the best chance of succeeding if you can offer a plausible reason for missing your payment(s) and/or demonstrate that you have made regular payments after your missed payment.
THREE OTHER STRATEGIES TO TRY
You might, however, approach the creditor and ask for forgiveness. If it appears to be a long shot, it most likely is! But it never hurts to try, and in certain circumstances, this strategy can work. This petition to the creditor might be made in the form of a goodwill letter. In a goodwill letter, you ask a creditor to remove negative information from your credit report. You will have the best chance of succeeding if you can offer a plausible reason for missing your payment(s) and/or demonstrate that you have made regular payments after your missed payment.
Keep Accounts Open If You Can
When you’re attempting to improve your credit, it’s tempting to close accounts. Leaving accounts open, on the other hand, increases your average account age, which improves your credit score. There is, however, a fine line to be drawn here. If closing your account(s) saves you money by avoiding additional, unaffordable fees, the benefits of doing so will likely outweigh the benefits of keeping them open.
Ask for higher credit limits
Although it may seem counterintuitive, having more credit available might actually help you improve your credit score. If you just seek and obtain a larger credit limit, your credit score should rise if you do not increase your credit use afterward. This method will help you enhance your credit utilization, which is an important part of your credit score.
You must exercise prudence once more. You must ensure that having more credit available does not result in more spending and debt.
Meet your current and future obligations
This may appear to be a no-brainer, but it doesn’t make it any less important! One of the most effective strategies to increase your credit score is to establish a long- term history of on-time payments. This may be achieved by keeping your credit card balances low and carefully budgeting. You should try to pay off your debts in full each month if possible.
Depending on your existing debt load and income, this might be quite straightforward or extremely difficult. Credit counseling can assist you in sorting things out and developing a long-term strategy for paying off your debts
STRATEGIES TO AVOID:
So far, we’ve discussed self-management strategies that can aid your success. There are a few tactics, however, that you should avoid since they may cause more harm than good. Here’s a closer look at two of them
PIGGYBACKING:
The process of being enrolled as an authorized user on someone else’s credit account is known as piggybacking. The authorized user is frequently added to the account without being granted full account access (in other words, they are not given a credit card tied to the account). This strategy can occasionally succeed since the account is added to the authorized user’s credit record.
These beneficial characteristics can help the piggybacking party if the primary account holder manages the account well and avoids making mistakes. However, if the original account holder is having financial troubles, the piggybacking party’s credit score may suffer. Another caveat: certain creditors do not report authorized users to credit bureaus, thus the piggybacking party does not profit in those cases.
As a result, although this could work, it’s also potentially dangerous. It’s one thing to make this arrangement with a family member (which is still risky), but it’s quite another to use a piggybacking service. Legal repercussions, fees, and lender suspicion are among the disadvantages of using a piggybacking service, according to Experian
FILE SEGREGATION:
This is a tactic that is frequently recommended by unscrupulous credit repair businesses, but it is something that a customer may perform on their own. In any case, this is a horrible idea that is probably definitely illegal.
File segregation is the process of creating a new taxpayer ID, usually an Employer Identification Number (EIN), and then applying for credit under that EIN. By doing so, a client may deceive creditors into providing credit because the consumer’s own credit history may be overlooked. The creditor would have no means of knowing whether or not it was working with a person with a poor credit history.
Take the advice of the St. Louis Federal Reserve and stay away from this approach at all costs, or you’ll end yourself in significant legal trouble
MOVING FORWARD:
Keep in mind that professional credit repair may not always deliver good value for money. False negative information is typically better challenged on your own. A goodwill letter can also be used to remove material that is genuine but negative. These are the most popular legal credit repair options.
In the future, you should try to keep your credit use low, increase the average age of your accounts, and pay on time. Taking these steps can help you develop a strong credit score that will stay for years.
You may start working with a credit counselor right now if you want further help examining your credit report or establishing a strategy to remain on top of your financial obligations