People often ask how they can fix their credit report or credit score. Depending on your situation and how much damage you’ve done, the answers vary. Here are answers to the 4 most common concerns:
Problem 1: I have a late payment on my credit report
If you only have one or two late payments on your credit report, it probably isn’t a big deal. Mistakes happen from time to time and sometimes things get missed or reported incorrectly despite someone’s best efforts. As long as you have a good credit history that spans many years, one or two late payments should only be like a small scratch on your car door. It’s annoying to look at, but in the big scheme of things, it really doesn’t change anything. However, if you drive around with a lot of scratches and dents in your car, people may get the impression that you are careless and may begin to ask questions. The same is true with your credit report; the more late payments that show up, the more likely your lender is to ask you what happened, and the more likely it is that your credit score will be impacted.
If you are always very careful to pay your bills on time, but are wondering if something slipped through the cracks, you can request a free copy of your credit report once every year to give your credit a checkup. This is a good idea anyway to make sure that your credit report is accurate.
If you have had credit for a number of years and you always pay your bills on time, yet you have a low credit score, it may be because your credit card balances are too high. If any of your credit card balances are routinely over 75% of your credit limit, this is a red flag to the credit scoring system, and it will significantly lower your credit score because it is a sign that if your income is jeopardized, you would not have the money to pay off what you owe. You are then considered a greater risk to a lender. To have a great credit score, it is best to keep your balances below 50% of their limits, even when you’re collecting points. However, the very best thing is to pay off your cards every month and try not to carry a balance at all. If you have high credit card balances right now, try to get them paid down to below 75% of your credit limit. Once you do this, you should see your credit score improve. If you are struggling to do this on your own, contact a non-profit Credit Counsellor and ask them for some guidance.
Your credit score can also fall dramatically if you have any unpaid collections reporting in the public records section of your credit report. These kinds of collection items include unpaid parking tickets, speeding tickets, driving fines, cell phone bills and utility bills. The good thing is that as soon as you pay these kinds of debts, you can ask the creditor to remove their collection notice from your credit report and many of them will. Get them to agree to doing this in writing before you make the payment. Follow through with making the payment you’ve agreed to and then ask them to follow through as well. If one or two collection items were the cause of your low credit score, then your score will instantly rebound once these collections are removed. However, other unpaid debts that you incurred as part of a formal credit arrangement like credit cards, loans and lines of credit cannot be removed as quickly from your credit report once they are paid in full.
If you have a lot of late or missed payments on your credit report, there is no legitimate way that you can fix your credit score quickly. The only way to repair the damage that lots of late payments causes is to demonstrate over the next several years that you pay your debts on time, as agreed. As time marches on and you consistently pay on time, your credit score will improve. The record of each late payment will be removed from your credit report 6 - 7 years from the date of the late payment. So in time, all late payments will be removed from your credit bureau report and you will have a fantastic credit score if you continue to make your payments on time. The only way that you can possibly accelerate this process is if you work with a non-profit credit counselling agency to pay off your debts.
If you would like much more detailed information on how to re-establish or re-build your credit, click here.