In the United States, credit is the king. In the modern era, a person’s access to credit can, in large parts, determine the standard of living they can attain. In the past, financing was not nearly as prevalent as it is today. Now everyone pays for everything on payments.
Unfortunately, that means if you make an honest mistake and tarnish your credit score, it can create a severe barrier for you. You may be unable to find financing, or you may have to pay exorbitant interest rates.
Best Methods of Building Back a Tarnished Credit Reputation
Luckily, if you do not have a perfect credit score, it is not the world’s end. It is possible for you in a relatively short period to get it repaired significantly.
A repaired credit score is just as good as one that was never tarnished. So, it is in your best interest if your credit score is not the best to get started working on improving it now.
● Monitor Your Credit Profile
You can only change what you can measure. If you are unaware of what the measurements are, you are flying blind. Trying to improve your credit score without checking your credit profile regularly is foolish at best.
While it may not be the most enjoyable thing when you first start, being honest with yourself about where you are financially and keeping an eye on your credit score is an essential part of this process.
Today there are many apps and websites available that will allow you to access your credit score anytime you would like freely. You can also request an official copy from each three credit bureaus once a year without charge.
● Minimize Monthly Expenses
It is important to budget and track your expenses so you know where your money is going and where you can cut back. Other than rent, food and utilities are likely the more pricey expenses that you pay each month. You might be surprised at how much money you spend on food and drinks each month, cutting back on dining out and going to the coffee shop can help you save a pretty penny. Another great way to save money is to be mindful of your energy usage and implement more energy efficient practices into your lifestyle; such as hang drying your clothes, investing in cooling sheets rather than cranking down the AC, or making use of natural light. There are many other energy efficient tips that an help cut your Green Mountain Energy bill. Cutting back on any excessive expenses, whether in the form of a lower electric bill, or reduced money spent on coffee is a great way to help speed up your credit repair.
● Dispute Any Incorrect Information
Occasionally in life, unscrupulous actors will steal information from you. Be it online or in a store when thieves steal your information; it can sometimes end up on your credit report.
If you notice any suspicious-looking accounts added onto your credit report as you monitor it, you should dispute them and immediately notify the credit bureaus. They can put a freeze on your credit to prevent any new inquiries or accounts from being added and look further into the matter.
If it is determined that a fraudulent activity did occur, then the credit account in question is removed from your credit profile and its effect on your credit score.
● Pay off the Accounts in Collection if They Can Be Removed
If you have got accounts that are sitting in collections, it is reported to the credit bureaus. After seven years, they will fall off. Until then, it will have a severe negative effect on your credit score.
Unless you can negotiate with the original creditor and get them to agree to drop the account out of collections once paid in full, most creditors will agree to these terms but do not commit to anything until you have it in writing.
Final Notes Regarding Damaged Credit and the Process of Rebuilding It
The most powerful thing that anyone can do to get out of debt more quickly is to pay higher than the minimum payment amount each month. Even something as small as an additional $10 each month could potentially save you thousands, depending on the terms of your financial agreements.
The power of compound interest is not something humans are accustomed to conceptualizing, but it is quite massive.