16 ways to screw up your efforts to clear your credit history
Credit repair is the process of correcting or removing inaccurate information from your credit reports to give you a fair and complete picture. It also involves taking steps to improve your credit score and resolve any future credit problems. Either you can do it yourself or hire someone who specializes in credit repairs to do it for your. Both paths can lead to mistakes. You must be aware of your rights and avoid these 16 common mistakes.
KEY TAKEAWAYS
- You can make mistakes in trying to improve your credit score.
- These mistakes can be avoided by being aware of your rights under the applicable credit laws.
- Also, you should review your credit reports at least once per year. You should only make any disputes with information you don’t agree with. Keep records and get everything in writing. Avoid disreputable credit repair firms.
Understanding your rights is just one part of the story. It is important to avoid making mistakes. These are the things to look out for.
#1 Mistake: Not checking credit reports
Knowing what your credit reports reveal is the first step in fixing your credit. You can access your credit reports free of charge if you have not requested them or it has been more than 12 months since the last time you looked at them. While there are many websites that offer access to credit reports, some even offer them for free. However, the FTC gateway guarantees you the FCRA-compliant reports. You should carefully read all three reports and look for any information that you believe is false or incorrect.
#2 Mistake: Procrastinating
Credit repair should not be delayed. You should correct any negative information you find on your credit reports as soon as you can. Even though most negative credit information is removed after seven years, it’s still a long time to live in an inaccurate credit file.
#3 Mistake: Don’t Take Credit Education for granted
You can correct or remove bad credit information from your credit reports, or just reduce debt and create a new financial path. This includes how to dispute incorrect information on your credit reports and what you need to do to reduce high-interest credit card debt prior to taking out installment loans.
#4 Mistake: No documentation
It is crucial to have accurate documentation about all debt in order to dispute incorrect information, protect your rights and keep spending within reasonable limits. It is important to know what the penalties are for late payments and the best conditions for applying for credit increases. You must be able to prove that payments were made on-time and you should always be ready to support your claims with documentation.
#5 Mistake: Disputing too Much
You should only dispute facts that you truly believe to be incorrect. Credit repair companies will often try to dispute every item in the hopes that one or two of them “sticks.” However, credit bureaus won’t likely take this approach seriously. You could lose positive information that improves your credit score, even if they do. You should also take your dispute to the correct entity. Most cases will involve the credit agency and not the creditor.
#6 Mistake: Discuss Online
Although all three credit agencies offer online dispute systems, critics warn that using these systems could rob you some of your rights under the FCRA. Credit agencies can avoid certain tasks by using online dispute systems. They can forward your information to creditors, provide you with written responses to disputes and give you the “method to verify” of the item. Critics suggest that you file your dispute with paper “hard copies” and certified postal mail.
#7 Mistake: Disputing With Boilerplate Language
To avoid credit agencies “red flagging” repetitive paperwork, it is important to not dispute “everything”. Use the template instead and be sure to use your own words.
#8 Mistake: Uncertified mail
All paperwork sent to credit agencies, collection agencies, or creditors should be sent by certified mail with the returned receipt requested. This will provide you with all the documentation and proof that the agency received your correspondence. Any communication you receive from any of these entities must be deemed “proof”. You should not verbally accept anything unless it’s also in writing. This will allow you to see what the agency has agreed and more importantly, have written proof.
#8 Mistake: Uncertified mail
False and misleading written communications are not only illegal for creditors or credit agencies. You could be charged with lying if you tell the truth. You must provide accurate documentation in dispute or to answer questions about a credit issue. It doesn’t matter how elaborate you are, but the truth of what you have to say is important.
#9 Mistake: Transferring credit card balances
It is not a good way to repair your credit. The amount you owe will remain the same and, in most cases the balance transfer fees will outweigh any interest benefit. Consolidating debt on one credit card is the same, particularly if you close other credit cards. This will result in losing any credit available.
#10 Mistake: One of the biggest mistakes is missing payments
A common credit repair error is when people miss payments on accounts that they are supposed to pay. Only exceptions are made if the account has been charged off or taken to collections. To keep the account current and avoid having to choose between a collection account or one that is due, you should always pay the current account.
#11 Mistake: Cancelling Credit Card Accounts
Credit history is 35% of your credit score. It’s not a good idea for anyone to close a credit card account. Instead of closing the account or cutting off the card, it may be better to keep a small amount and pay it off each month. While it will require discipline to avoid getting into debt, your credit score will be better for it.
#12 Mistake: Applying to New Credit
The chances of getting approve for credit, particularly unsecured, are low if you’re trying repair your credit. It’s possible to waste a hard inquiry that could end up lower credit scores right when you want them to rise. You should save the application for credit for later, after your credit is repaired.
#13 Mistake: Paying debt collectors
Although it may seem counterintuitive, paying a debt collector could cause unanticipated damage. For example, if you have an old debt that has expired, making a payment could allow you to update that debt. It’s best to not pay until the debt collector has proven that the debt is current and valid. Remember that debt collectors can scare you into paying. Do not pay for anything you hear verbally. Only written communication is acceptable.
#14 Mistake: Hire a shady credit repair company
Some people feel that they don’t have the skills or time to repair their credit. Although it can be convenient and beneficial for these people to hire a credit repair company, the cost is high. Credit Karma states that professional credit repair services can cost $35 per deletion or a flat fee. The total cost could reach $750 or higher. There are some companies that charge a monthly fee of $50 to $130. You will decide if paying someone to fix your credit is worth the expense. Credit repair companies generally don’t have a good reputation. Review your rights and the CROA to see what they can do for you.
#15 Mistake: Filing bankruptcy
People may decide to file for bankruptcy because they feel that they need a fresh start. The bad news is that bankruptcy won’t improve your credit rating. It will stay on your credit report for as long as 10 years. Even after it’s gone many lenders will still ask you if you have ever file for bankruptcy. This will use by them to deny your loan application.
What should you not do to improve your credit score?
When trying to improve credit, the most common mistake is to hire a credit repair company that is not reputable. You can’t get credit repair help from a professional. So, think carefully before you hire them.
How can errors on a credit report be fix?
Yes. Yes. They are legally require to investigate and correct errors once confirm.
Credit Bureaus Making Mistakes
Yes. A Federal Trade Commission study found that five percent of credit report errors are related to at least one credit card.
The Bottom Line
You can make mistakes in trying to improve your credit score. You can avoid making these mistakes by knowing your rights under the applicable credit laws.
Also, you should review your credit reports at least once per year. Only dispute incorrect information. Keep records and get everything written. Avoid disreputable credit repair firms.
