If you’ve been through a rough financial patch, it’s likely that your credit has suffered. Late payments, minimum-only payments, credit-card balances that are too high and maybe even auto repossession could have drastic impacts on your credit score. If you’re in a better position now, possibly with a new or better job, your credit can be repaired. It will take time, but it can be done.
Here’s how:
First, find out how bad the damage is. Send for your credit reports from all three of the major credit bureaus. Go over them carefully. Look for mistakes, such as accounts that aren’t yours, wrong credit limit listed and accounts that you have already paid off showing a current balance. Notify the credit bureaus in writing (certified mail, not online) about any errors, and ask for an investigation. They have 30 days to respond. If they can’t verify the accuracy of the item, they have to remove it. Once the repairs are made, get another batch of credit reports and do a line-by-line comparison.
Next, make a plan to hone down your credit. Determine which of your credit cards has the biggest debt-to-availability ratio. A card with $1,000 availability and a $900 balance is worse than a card with $10,000 availability and only $2,000 owed. The reason is that nearly maxing out a card counts more heavily against you because a larger percentage of your available credit is used.
Don’t cancel any cards, for the above reason. When you get a card down to a zero balance, that availability helps your overall percentages. (History helps: Keep old accounts open, if only for the longevity they show.)
Pay more than the minimum on each card, on time, every month, with more money going to the ones with higher percentages of available credit used. Look at the credit report: You’ll see a column indicating whether you have been making minimum or better payments. Even $10 extra takes you out of the “minimum only” category.
Don’t take on any new credit until the current problems are resolved.
Full credit repair will take time, but it’s worth the aggravation. The biggest benefit to taking steps to repair your credit is that future credit will be cheaper. You won’t be in the “likely to default” category anymore, saddled with high interest rates.
David Uffington regrets that he cannot personally answer reader questions, but will incorporate them into his column whenever possible. Write to him in care of King Features Weekly Service, P.O. Box 536475, Orlando, FL 32853-6475, or send e-mail to [email protected].
(c) 2011 King Features Synd., Inc.
