Cleaning Up Your Credit

 

Knowing how to fix your credit is the first step to raising your credit score.

Correcting negative marks on your credit such as delinquencies, foreclosures, bankruptcies, and collections can take many years until they do not affect your credit score.  Fortunately, there are a few steps that a borrower can take to clean up their credit immediately. 

For one, it is a good idea to pull your credit so you know what issues, if there are any that you can resolve.  Sometimes simple collections from cell phone companies, cable companies, or even movie rentals which may be small in amount can drastically damage your credit depending on the collection.  In most cases, especially in today’s market most lenders (banks) require that all collections be paid before being approved for a loan so paying off all collections is a must if you want to buy a home.  After paying these collections just report that they have been paid in full to any of the three credit bureaus (TransUnion, Equifax, and Experian) and they can be taken off your credit score in a matter of days.  Sometimes it takes a while to show the improvement of your credit score so it is important to follow-up with the bureaus to make sure the collections show that they have been paid.  For your records it is a good idea to get letters from the collection agencies that state that these collections have been paid in full.   

Also, any judgments that appear on your credit must be paid.  A judgment is different from a collection in that a court order has summoned a party to pay a debt that is owed.  Lenders will not loan funds to a borrower unless the judgment has been paid and released. 

Delinquencies can be explained in writing but unfortunately if there are any late payments on a current mortgage or rental within the last 12 months most banks will not lend, although there are programs which allow at least one late maybe two. More times than not any late on a current mortgage will disapprove a loan. 

Some other tips to help clean up your credit are as follows:

It is important to pay down credit card debt to at least 30% of the total balance. Too much revolving debt can disqualify you for qualifying for a loan.

Close troublesome accounts. 

Have emergency funds just in case you lose your job.  Emergency funding can help cover monthly expenditures, rather than having to be late on any payments. 

Do not have your credit pulled on a regular basis. Having your credit pulled more than once outside of a 14 day or two week period can hurt your credit score. 

Remember, not all credit reports are 100% accurate.  There may be inaccuracies, so double check everything that has been reported.  Resolving errors may increase your credit score by 100 points.  Value your credit the same you would your child, your identity, and even your life.  Your credit score holds the keys to your financial future.