Credit Repair

Maintaining your credit is an integral part of a stable life and household in modern day America. Good credit allows you access to financial products such as unsecured and secured loans, mortgages, credit cards, automobile loans, and many other consumer credit products. Your credit score can also be used to determine your eligibility for a stock trading account, or even your suitability for certain jobs that require a security clearance. It is incredibly important that you treat your credit just like you would your own health - with a proactive approach that focuses credit maintenance and intervention prior to potential adverse credit impacts.

The Fair Isaac Corporation (FICO) is the overriding standard credit score in the United States. Your credit score is determined by proprietary computer software utilizing a range of data that includes your three major credit bureau score - Experian, Equifax, and TransUnion. You should check your credit score frequently; there are many websites available today that let you check your credit score for free. A good FICO score is generally over 650, with an excellent credit score being in the 700s. It is rare for someone to have a credit score over 800. But with time, patience, and complete financial responsibility and maturity, it is achievable. If you have a credit score that is below 650, it is still possible to obtain new credit if you have a reasonable debt to income ratio. However, if your credit score is below 600, you can expect that you'll need a co-signer for new credit, your application will be denied entirely, or you'll be saddled with a high Annualized Percentage Rate (APR) and/or lender fees.

Maybe you have less-than-perfect or even bad credit. This does indeed put you at a disadvantage, but it's not irreversible. It can be fixed. How? You start by checking your credit for free and setting up credit monitoring on your account. All free credit checking websites allow you to monitor your credit scores from the major bureaus - Experience, Equifax, and TransUnion - and set up alerts so you know when your FICO score and individual credit bureau scores change. These free websites will also notify you of new inquiries (individual credit checks) on your account as well as provide you with detailed month-to-month data regarding the debt you carry. If you're heavily in debt, your first access on one of these sites will likely be a bit of an unpleasant surprise. You will be able to see all of the times your credit has been checked, how much debt you have, when you've been late for payments, non-payment history - all of this, in addition to your FICO score and bureau scores. Now, breath. This is your first step to freeing yourself of debt and repairing your credit.

Now that you can review your credit record, it's time to take affirmative actions to correct your individual situation. For some, it might be as easy as seeing all of your debt in one place and developing a financial plan to clear each debt over time. The best way to do this is by creating a monthly spread sheet that lists all of your debts, expenses, and income, and appropriately assigns payments to each debt. The important part of this is discipline. If you pay down a credit card by $250 one month, don't spend that $250 the same month. Wait a month, pay it down another $250 the next month (the total is now $500 less interest charges), and then spend $100 as a reward for your discipline. The following month you're even further out of debt. Doing this will lower your overall balances and debt to income ratio which, you guessed it, improves your credit score. A famous person once said - lather, rinse, and repeat. If it works, keep doing it.

So, we now have one action that is helping improve your credit. Now, let's look at your inquiry (credit check) history. Inquiries stay on your credit record for 2 years. "Hard inquiries" only affect your credit for the 12 months following the inquiry. "Hard inquiries" are different from "soft inquiries." Soft inquiries are generally "looks" at your overall credit score, whereas hard inquiries dig a bit deeper and provide potential lenders with all information about your credit record. When you're exploring credit options on a casual level, it is important to ensure that only soft inquiries are used until you find the exact product you're looking for.

Upon review of your credit score, it seems you have a few credit inquiries that are over 2 years old. Having them removed is as simple as contacting the bureau that performed the credit check. All three credit agencies have forms, fax numbers, emails, and support forms dedicated to this action. Do not expect an overnight reaction to your request. It is very likely that any request to move an aged credit inquiry will take at least 6-8 weeks. This action can also be performed by a company specializing in credit repair. Over the past several years, new businesses that help consumers address their credit score issues have become more prevalent. Not only do they have the knowledge of how each credit bureau and FICO works, they also have the ability to contact each of the bureaus on your behalf to remove aged credit inquiries, address aged non-payment or late payment issues, and also provide documented evidence of your payment of certain debts that might still be showing an outstanding balance. Though you will pay for this service, it may be an invaluable tool if you're looking to quickly assess and repair your credit in hopes of taking out a home loan or other secured/unsecured debt for a major purchase.

Tip 1: We cannot stress enough how it important it is to protect your credit. People always think that having a shiny American Express (Amex) Platinum card with no preset spending limit is the result of being rich. It's not. It's the result of appropriately managing your credit, paying your bills, and demonstrating financial discipline. The majority of Amex Platinum cardholders are not "rich." They have just always maintained a strong credit record, allowing them the prestige and security of having a card with a high spending limit and great benefits.

Tip 2: Though times have changed a bit with regards to how credit is checked, especially in the preapproval phase of taking on new debt, you must always understand that any credit check could impact your credit account. Be sure that any preapproval being performed is a "soft inquiry." This includes credit checks for a furniture package you might be looking to buy, or a condo rental that you've applied for (the latter normally being a "hard inquiry"). The worst case scenario is that you decide against the purchase, but you're still stuck with the credit inquiry. So, in essence, you just lost credit score points for nothing.