How To Repair Your Credit Yourself

By
Real Estate Agent with Keller Williams Realty Centre DRE# 646236

Each week I get several calls from buyers who want to purchase a home but they don't meet the credit requirements to qualify for a mortgage loan.  There are a number of credit repair companies that offer to "fix" your credit but most of them charge a fee for this service.  With a little time and effort you can repair your credit yourself and be well on your way to becoming a homeowner.  Here are a few simple steps you can take to start to improve your credit:

 
Pay Bills On Time
This first step sounds like a easy one, right?  Most people are surprised that making one late payment can lower your score.  Making on-time payments (even if you pay the minimum balance) can help you maintain and/or improve your score over time.
 
Check Credit Reports
Next, you want to obtain copies of your credit report from the 3 credit bureaus: Equifax, Experian and TransUnion.  You can request a free copy of your credit report at annualcreditreport.com.  Each credit reporting agency collects and report different types financial accounts so you want to be sure to do a detailed review of each report for any erroneous information.  Below are some common errors that may appear on your report (this list is not all-inclusive so be sure to thoroughly check your report for errors)
  • Outdated or incorrect personal information
  • Fraudulent or mistaken account information
  • Incorrect account details
It's important to review your credit report every year because any errors can lower your score and cause you to be denied credit.  To dispute the errors contact each of the credit bureaus and request that they remove the information from your credit report. Click here to search for sample credit dispute letters if you're looking for ideas or guidance on what to include in your dispute(s).  

Resolve Delinquent Accounts
You'll want to create a debt reduction plan to pay off any past due accounts, collections, judgments and/or liens.  Start by contacting creditors to ask if can re-age your account to remove any past delinquencies.  Not all creditors will agree to do this and If they are not willing to you still want to be sure to pay off the debt because a "paid in full" on the account will still have a positive impact on your score.  If you cannot pay off the accounts all at once contact each creditor and make a payment plan that fits your budget.

Manage Credit Card Debt
Having high balances on your credit cards can also have a negative impact on your score.  A good rule of thumb is to maintain a balance of no more than 30% of the credit limit on each card.  It's often not a good idea to close any old accounts as part of your credit score is based on the length of your credit history.  If you have too much credit and need to reduce your debt limits consider closing any newer accounts that have the least amount of history.  
 
If you do decide to work with a credit repair service be sure to research the company to ensure they are a reputable and can deliver on the promises they offer.  A good place to start is the Better Business Bureau or by contacting the company directly and asking them to provide you with references from current or past clients.  If they are unwilling to provide you with this information move on to the next company until you can find one that you trust.  Be wary of those companies make claims that sound too good to be true.
 

While you are here I would also like to offer you a FREE (no obligation) home buying consultation.  YES, I would like a to schedule a FREE Home Buying Consultation.

 
Image courtesy of Stuart Miles/FreeDigitialPhotos.net

 

Comments (4)

Bahman Davani, CM at Texas Five Star Realty, Plano, TX (214) 457-7055
Texas Five Star Realty, Plano Texas - Frisco, TX
Homes for Sale in Plano, Frisco, Prosper, Allen TX

There is a newly published book, "Credit Score Tips and Tricks" that shows you step-by-step how to correct/remove inaccurate information from your credit files. Check it out.

Oct 07, 2013 02:48 PM
Jerry Lucas
ABC Legal Docs LLC - Colorado Springs, CO
Mobile Notary Colorado Springs, CO Notary Training

Small business owners should form a corporation or LLC, with a separate tax ID number, rather than operating as a sole proprietor under a social security number.  With a separate tax ID number, the business can establish its own credit history, separate from the business owner's personal credit history.

Oct 07, 2013 03:00 PM
Shanequa Jennings
Keller Williams Realty Centre - Columbia, MD
Personalized Attention with Professional Results
Thanks Bahman! I will check out the book.
Oct 07, 2013 09:47 PM
Brian DeYoung
also affiliated with Berkshire Hathaway Home Services Heritage Realty - Ithaca, NY
The Realtor with personal investment background

I definitely agree that using a company usuallu is not the answer.

Pay as agreed. Get your credit report. Dispute a few items if there is a reason, or any question in your mind. 

Meet with an agent or a mortgage broker, so that you can get some professional advice. 

Oct 08, 2013 07:49 AM