Credit score is one of the most important determinants of your financial health. It reflects your fiancial behavious over the past years and determines your ability to borrow money in the future. Moreover, it also influences the interest rates on every borrowings and your credit card useage. A poor credit score can seriously hamper your chances of obtaining loan approval for future investments. However, to prevent such unwanted circumtances it is necessary to understand the DIY credit repair method. It would help you to take charge of your credit profile and get on track quickly whenever your credit score drops. The following section aims to explain the DIY method of credit repair in detail.
Steps to Repair Credit Score
There are multiple factors that are taken into account while preparing a credit report and every detail on a credit report will continue to show up for seven to ten years. However, even though you can modify accurate negative information from your credit report, you can take proactive steps to improve your credit score. Here are some important tips on DIY credit repair methods.
1. Evaluate Credit Report
Evaluating your credit report is the first step of DIY credit repair. Most of us are not aware of the importance of tracking daily credit reports. It helps you to keep a check on your debts and other financial activities to have a handle on it. All three credit bureaus release credit reports once a year and you can obtain a free copy online.
The report will provide detailed information on every aspect of your financial activities including expenditure, payment history, and negative information like late loan payments and bankruptcy. It is important to review all the information carefully to dispute any discrepancies. Since, every negative information has an impact on your credit score, it is important to eliminate false negative information to obtain timely loan approval in the future.
2. Disputes Inaccuracies
The next important step is to dispute inaccuracies in teh credit report. For instance, your credit report might record your past loan payment date incorrectly. If the date marks late payment it will surely lower your credit score. Thus, it is important to be aware of your actuall payment dates so that you can dispute the false information.
You can dispute the false information through online forms released by all the three credit bureaus. Make sure you provide supportive documents to bolster your claim. You should expect a correction within 30 days.
3. Improve Your Bill Payments
Your credit score takes into account your bill payment timeline. If you are habitually late payer of utility bills, it is recorded as a negative point on your credit report. Thus, even if you can’t change the existing credit report you can take proactive steps to pay all your bills on time. However, if you are not a habitually late payer and accidentally miss a payment once, your credit bureaus may consider dropping the record from your credit report. So make sure you communicate all these issues and justify your position to the credit bureaus to improve your credit score.
4. Clear Existing Debts
Clearing existing debts is the best way to improve credit score. There are two methods of approaching outstanding debts. One is the ‘debt avalanche’ method where you pay off big debts first to boost your credit score. On the other hand, you can choose a debt snowball where you can pay off small debts first. However, it is important to accurately analyse your financial situation to make this decision. For instance, if you do not have any medical insurace, paying off a huge loan might lead to a financial crisis during sudden medical emergencies. So, it is important to analyse your financial liabilities and emergencies before paying off debts.
5. Maintain a Balaced Credit Utilization Ratio
Credit utilization ratio is an important component of credit report. It refers to the amount of debt you have revolving divided by your total credit available multiplied by 100. You must not use more than 30% of your total available credit. On the other hand, you can also apply for an extension of credit limit on your existing credit cards or else apply for a new credit card to extend your credit limit. However, an extra extension of the credit limit might encourage you to spend more. This might increase your debt liabilities in the future. Thus, it is recommended that maintaining your credit credit utilization ratio below 30% is a better option.
6. Get a Credit Counciling
Even though teh DIY credit repair method is manageable, certain complex credit situations might become overwhelming for you to manage. For instance, having debts across multiple accounts can be problematic to handle without professional guidance. On the other hand, disputing credit report errors or negotiaing with lenders requires professional guidance. Thus, it is beneficial for you to seek counciling from top credit repair services.
Endnote
The blog has discussed the essential steps of DIY credit repair. Hope this proves insightful for you. Before you try the DIY method, it is beneficial to have training under professional guidance to handle DIY credit repair. Make sure you choose top credit repair services to avail the best guidance.
