A case of bad credit can prevent you from achieving many of upir goals in life. From buying a car to getting a home loan, the information in your credit report is essential in both getting approval from a lender as well as obtaining a low interest rate. Just because you have no credit or bad credit doesn't mean you'll never reach your goals. With some hard work and perseverance you can improve your credit report in less time than you may think.
Step 1
Order your free annual credit report. The FTC (Federal Trade Commission) has provided a way for everyone to get a free credit report from the three main credit bureaus once each year. You can get these credit reports by visiting AnnualCreditReport.com and filling out their online form.
Step 2
Correct any errors found in the report. Whether accounts opened through identity theft or clerical mishaps on the part of the creditor or credit bureaus, incorrect information can appear on your credit report. You can correct this information (often raising your credit score in the process) by writing a request form asking the credit bureau to investigate and remove any incorrect information. Be sure to send photocopies of any evidence that you have, such as credit cards or billing statements, to back up your claim. Most credit bureaus will respond within 30 days.
Step 3
Get any past due accounts back to a current status. Even being 15 days late on a payment on your accounts can negatively affect your credit rating. Bringing all your accounts up to date, and consistently paying them on time each month will quickly raise your credit score.
Step 4
Call the creditors of any charged-off accounts or accounts in collection. Judgments, collection accounts, and charge-offs can really take a bite out of your overall credit score. These accounts may also be taken to court, resulting in wage or bank account garnishments. Luckily, many creditors dealing with these accounts will settle them for much less than what is actually owed. All you need to do is contact them and ask what kind of a settlement they are willing to offer.
Step 5
Apply for a secured credit card through your bank. A secured credit card is program that allows you to put down money into a special savings account as collateral for a line of credit. If you miss a payment, the lender uses the money in the savings account to guarantee payment. Each payment is reported to the credit bureaus, allowing you to build credit. There are many secure card companies out there, but the most trustworthy source, usually with the best interest rates, is your local credit union or bank. After about six months of paying your bills on time, the lender may offer to refund your savings account and offer you a true line of credit. This will get you on your way to qualifying for other credit lines such as personal loans or home mortgages.
Tips and Warnings
- The key to good credit is always paying your bills on time. Being late, even once, can negatively affect your credit score.
- Avoid payday loans as a way to pay off creditor accounts; the interest rates and penalties will often leave you in a worse financial shape.
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