The main goal in fixing your credit report should be to remove negative information while adding positive information. All negative information less than 48 months old directly impacts your credit score.
Bad credit impacts your good name and your wallet. Over time you end up paying much more in interest with bad credit scores. Once you decide to fix your credit, you must involve as many strategies as necessary with a comprehensive plan of attack.
Disputing bad credit is one common strategy but there are other strategies to fix your credit.
6 Strategies to fix your credit report
1. Rehabilitate Past-Due Accounts
If you are past due on a credit card or loan, some lenders will allow you to rehabilitate your account. Rehabilitation is a process by which lenders erase negative marks from your credit reports once a series of on-time payments have been made consecutively. Usually lenders require at least 6 to 9 consecutive on-time payments in order for the negative marks to be deleted. Rehabilitation is not something lenders generally offer. You will have to request it.
A supervisor or manager may have to be involved in order to get account rehabilitation. Be persistent because many lenders will work with you. Remember to always negotiate a better credit rating in the rehabilitation process. You want the negative past due marks deleted once the rehabilitation process has been successfully completed.
2. Reduce Account Balances
Reduce account balances to 10% or less of your available credit limits. Keep those balances low and your credit scores will improve. Never go over your available credit limit. This hurts your credit score tremendously. If you have some extra cash on hand pay down your credit card balances. In the alternative, if you do not have the cash on hand to pay down your credit card account, request a credit line increase but don't spend it!
Many credit card issuers can increase your limit without running a credit report if your account has been in good standing. Make sure you ask if a hard inquiry or a soft inquiry will be performed. If it's a hard inquiry then you will lose points on your credit score.
MyFico, the consumer division of FICO, published a report on the traits of consumers with FICO score of 785 and higher. It was found that “high achievers” keep balances low and use an average of only 7% of their available revolving credit; and, never max out your credit card.
3. Attack Collection Accounts
Take a look at your credit reports and deal with collection accounts. Make sure you have all three of your credit reports, each could have different information. You may be entitled to free credit reports under certain circumstances.
First, determine whether the collection account belongs to you, is outdated (over 7 years old), a duplicate account, or even previously paid.
As the junk debt buying industry continues to grow collection accounts should be under close scrutiny. Collection accounts are often sold from one collection agency to another and sometimes 2 collection agencies end up on your credit reports for the same debt. This is incorrect and must be disputed.
Zombie debt remains a problem. It involves older debt, often past the statute of limitations, being resurrected by a collection agency. Once a collection account reaches 7 years, it can no longer appear on your credit reports.
There are horror stories where consumers have been harassed by collection agencies about closed, charged-off, paid in full or even settled debt. Remove outdated information from credit reports.
4. Get a Secured Bank Loan
A bank loan can help you rebuild credit. A secured bank loan will have the same positive effect on your credit scores as an unsecured bank loan, as long as it reports to the major credit reporting agencies and paid on time.
Opening a secured bank loan does not require good credit because it's secured by money on deposit. That money will be earning interest in a savings or certificate of deposit account. Secured loan limits can range from $200 on up.
You must have enough money in your monthly budget to maintain timely payments as the funds you deposit will be on hold until the loan is paid in full. If you do not have the money upfront to open a secured loan, an alternative would be a Credit Builder Loan. It has the same positive effect of a secured bank loan but you don't need the money upfront.
5. Settle Collection Debts, Request a Deletion
Once an account is purchased by a collection agency, it can often be settled for pennies on the dollar, especially older collection accounts. If you decide to deal with a collection agency never pay what they are requesting, which often includes inflated fees and interests.
But more importantly, if you choose to settle a debt with a collection agency, get that negative information deleted from your credit reports.
There is no incentive to pay a collection agency without getting a negative entry deleted. Paid collection items hold the same negative weight as unpaid collection items because both are considered negative. Negotiate a pay for deletion if you choose to settle a collection agency debt.
6. Add positive credit accounts
Secured credit is the best kept secret to rebuilding credit. Consumers with bad credit can be at a lost when seeking new credit. Secured credit cards operate just like unsecured credit cards and offer a quick, painless way to add good credit to credit reports.
There are some secured credit cards, like the OpenSky® Secured Visa® Credit Card that become partially unsecured after several months of on-time payments. The OpenSky® Secured Visa® Credit Card does not require additional secured funds to increase your credit limit. The alternative to secured credit cards would be a card like the First Digital Mastercard®. It is unsecured and designed for people with damaged, poor or fair credit.
When you have really damaged credit, secured cards are not your only option. You might want to consider guaranteed credit cards for adding good credit. With guaranteed approval cards, the terms are not the best, but once you improve your credit scores you'll qualify for credit cards with better terms.