Building Your Own Credit & Raising Your Score
Like many others, my credit history began as a child when a family member decided to used my credit information to open up a cellphone line. Of course that situation didn't turn out well and before I was able to get anything in my own name, my credit accumulated debt. When I landed my first job, I was eager to get the debt cleared up because I wanted a cellphone of my own. By 17, I was starting to be sent credit card offers with $250 credit limits and cheap monthly payments. Of course I maxed those cards out on icy white Air Force Ones and the then-popular Miskeen outfits. It was so easy to get a credit card! I was applying for everything they sent me. Some denied me but most were approved. But I really gave into the spending temptation when I was sent a credit card with $1,000 limit! Fast forward, I was 18 about $3,600 in debt before I could even figure out how to pay it back! I did my best paying the "low" monthly payments but that interest was kicking my ass and so were the few late payments I made.
One day I decided to stop avoiding my growing debt and face my credit report and score. Whew chile... the truth hurt. The inquiries and late payments were killing me! I was barely making it and I knew that in order to get anything of value in life that I wanted (a new car, a motorcycle, an apartment), I had to have my credit in order. I immediately went to work on repairing my credit. The steps I took are a little less traditional (joined the military for money) and will not be a step-by-step that everyone will be able to follow, but the key points are universal to all those willing to fix their credit themselves.
When repairing your own credit, you must understand some things. EVERYONE SITUATION IS DIFFERENT & BE PATIENT.
Why should my credit score be important to me?: Straight to the point... nearly everything needed to live life requires some sort of credit. Nearly anything you have to finance will require the use of your credit scores as an efficient way to predict how risky a customer you will be. If your credit score is low, it indicates that you are more likely to make late payments or file costly insurance claims. In turn, this means that the creditor is more likely to lose their investment by lending you money or their property. Your way of life and future big purchases can and will depend on your credit score. Higher credit scores earn lower percentage rates on credit cards, car loans, and home mortgage rates.; which means more money for you to save or spend on yourself. Your credit score can also determine your next apartment approval. Did you know that certain employment depends on your credit rating? Your credit score is a number scale used to determine your credibility and financial responsibility with borrowed money.
My credit score is really low. I don’t think there is anything I can do to raise it!:
If you already have a 90-day late payment record on your credit history, then your scores are already suffering. Be sure that the information is accurate on your credit reports. If it isn’t, then you have the right to dispute it not only with the credit reporting agencies but also with the lenders who reported it. Your goal is to have the error corrected or removed, and once it is, your credit scores will immediately recover.
What can I do to raise my credit score?: Raising your credit score is not easy and takes time, patience and financial discipline to re-establish. In some very detailed steps, I am going to tell you how I went from a damaged credit score of 580 at the age of 18 to a 700+ credit score in a few short years.
Step 1: Obtain your credit report
Obtain a totally FREE credit report every year from www.FreeCreditReport.com. You will receive the option to print it immediately and there will be a copy mailed to your home.
Once you have your credit report, begin going over your accounts and check for accuracy and any discrepancies. Highlight and make note of discrepancies, tardy accounts, and inquiries.
Luckily today, many bank accounts and credit cards come with a free credit score option. To view your credit score, simply log into you account and search for its feature within its menus.
Step 2: Begin drafting letters to dispute credit inquiries
Credit inquiries are requests for credit to say the least. A lot of credit inquiries in a short period of time can do some damage to your score. Any unknown credit inquiries on your report should be disputed and removed.
Prepare letters to each inquiring creditor asking them to remove their inquiry. The Fair Credit Reporting Act allows only authorized inquiries to appear on the consumer credit report. You must challenge whether the inquiring creditor had proper authorization to pull your credit file.
TO DOWNLOAD A COPY OF THE SAMPLE LETTER: CLICK HERE This credit repair letter goes to all three credit reporting agencies when you are disputing inaccurate information on your credit reports. It will be best to send via Registered Mail and keep the dated receipts for postmark proof.
If after 30 days you have not heard back from one or more credit bureaus, send a follow up letter asking them to address your original dispute. This letter should quotes the FCRA as supporting the fact they have 30 days to investigate the account and if they cannot verify the information within 30 days, they must delete the information.
If your credit reports are accurate, there are still things you can do to to improve your credit scores, despite the late payments dragging them down. First of all, you’ll want to make on-time payments going forward and wait for the negative information to age off your credit reports. Beyond that, you can focus on paying off debts, using as little of your available credit on your credit cards as possible and only applying for new credit when it’s necessary. The information you get when you check your credit scores on www.Credit.com should help you identify which areas need your attention most as you work to improve your credit.
Step 3:Contact creditors and initiate payoff plans for outstanding/overdue accounts
Call the billing department of your creditor and arrange a payment plan. Find out if any late payments can be removed from your billing history and if they offer a payoff discount. If you plan on paying an account of in full, find out if they offer a discount for the amount due. Some companies will allow you to negotiate a pay off price and save you money!
It’s also important to know paying off a collection account does not remove it from your credit report or improve your credit scores.
If your account has not been sent to collections, sometimes you can plead your case with the credit agency that you were a good and loyal customer prior to a unfortunate circumstance, the creditor may remove late payments or even refund late fees. Send this letter to the creditor and see what may happen. Make sure to tailor the letter to fit your individual circumstance.
You may have heard that you can negotiate a “pay for removal” deal with a debt collector or creditor, but these companies will likely tell you that the contracts they have with the credit agencies prohibit them from doing so — otherwise, people’s credit reports wouldn’t accurately reflect their payment histories.
Step 4: Obligate to paying all bills on time
Paying your bills on time is the most important part of obtaining a good credit score. I found that the easiest way to stay on top of it was by adding all my bills (insurance, utilities, car note, the baby sitter) to my bank accounts bill pay section so I could easily send payments without having to log into several different websites. Its usually free to do this from your bank account! I use BB&T and USAA and they both offer free bill pay services.
PAYING MORE THAN THE BALANCE DUE CAN HAVE SOME VERY POSITIVE EFFECTS- Over the years, I've learned that if the minimum payment due is $25, to try and pay slightly more... $30, $50..... and if you don't have it right then and there, there's no problem with throwing $5 & $10 on it randomly throughout the month. With every single card I've done this with, they've increased my credit limit randomly.
Most negative items, including late payments, will stay on your credit reports for seven years, but not all negative information is equally damaging. Here’s the first late payment secret you need to know: A payment that is 30 or 60 days late isn’t going to have as serious an effect on your credit score as a payment that’s 90 days past due.
Because scoring systems are so focused on predicting whether or not you’ll go at least 90 days late, 30- or 60-day late payments that occurred long ago are actually not that damaging to your credit scores, as long as it is an isolated incident. It’s when your accounts are recently reported 30 or 60 days past due on your credit reports that your credit scores plummet temporarily.
Since doing all these steps myself, I've attained a credit score of 763 and climbing! My goal is to be 780+, since that's in the same tier as the 800+ scores.
BONUS TIPS: Saving Money and Making Investments With A Simple App:
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INVESTING IN STOCK- I just started using STASH. I know nothing about investing in stocks but I gave this app a chance since it made it easy to invest in companies I believe it. I'm currently investing in marijuana! I'll give you an update when I have this investing this down.
DID YOU KNOW: Your credit card company may offer a lower APR percentage rate for short promotional period. Contact your creditors finance department and ask!
I sent my dispute/plea letters, set up my pay-off plans and organized my bills. Now what?
Be patient. As the months pass, you will begin to receive letters from the creditors you've contacted. Some responses may be notices of removals and some will be validated inquiries.
I don't feel like doing all this work myself. Can you refer me to a trusted company that can?
For hire, there are some professionally trained lawyers who will do everything for you after submitting your credit report. Lexington Law is a personal favorite of mine. Everyone's situation is different. DO YOU OWN RESEARCH AND DO WHATS BEST FOR YOU.
I hope this post helps!