Hi there!
As someone who’s been down the “damaged credit” road and back, I can
assure you that you can get things taken care of well, with only the
investment of your time and patience. Since you’re well aware that
it’s not an overnight fix, you’re already one step closer to getting
your finances straightened around.
So how to take the remaining steps?
First, sit down with all of your bills and work out a budget. Set
aside what you need for rent, car payments, car insurance, student
loan payments, etc, and determine how much you have left to throw at
your debts. You’ll need to stick to your budget very carefully while
paying things off, so be certain to leave yourself a little wiggle
room for emergencies.
Next, get your credit reports. If you've been denied credit in the
past 60 days because of information found on a credit report, you are
eligible for a free copy of your report from the reporting agency
noted on your denial letter. Otherwise, a report from each company is
about $9, and can typically be ordered online:
Equifax
P.O. Box 740256
Atlanta, GA 30374-0256
https://www.ai.equifax.com/ai/
TransUnion LLC
Consumer Disclosure Center
P.O. Box 1000
Chester, PA 19022
1-800-888-4213
http://www.transunion.com/Personal/PersonalSolutions.jsp
Experian
P.O. Box 2002
Allen, TX 75013
1-888-397-3742
http://www.experian.com/consumer/index.html#
Be certain to get copies from all three agencies, then make several
copies of each. Get yourself settled in with a highlighter and a
package of post-it notes, and go over each report carefully to check
for inaccuracies. If you find any inaccuracies, highlight them, and
stick a post-it in that spot explaining why it is wrong (paid off,
etc.). If you have receipts to back it up, attach a copy of the
receipt.
To dispute incorrect information, compose a letter to each agency
explaining which information is incorrect, and ask them to either
verify the information or delete the listing. Enclose a copy of the
report with the mistake circled, highlighted or otherwise clearly
indicated, and copies of any supporting documents.
Also include in your request:
* First, middle, and last name (including Jr., Sr., III)
* Current address
* Previous addresses in the past two years, if any
* Social Security number
* Date of birth
* Current employer
* Phone number
* Signature
Next, go over each report and make a list of your “small” debts, and
to whom they are owed. Rather than consolidate them, which will
actually drag out the payment process, your best choice is going to be
to pay these off outright.
List them in order of priority and affordability. If you can spare
only $100/month to pay these things off, start with your $100 debts
first. Write to each creditor, enclose a check or money order for the
amount you owe, and ask that they:
1) Report to the credit bureaus that the account has been “paid as
agreed” and
2) Ask that they confirm in writing that they have done so, and that
the debt has been satisfied.
Send these certified mail, return receipt requested, and hang on to
the return receipt. You may need that receipt later if they “lose”
your request (it does happen, so “CYA”!).
Most creditors are happy to do this for people who take the initiative
in paying off their debts. It saves them costly collection activity,
and shows that you’re taking responsibility for past mistakes.
Once your little debts are out of the way, tackle the larger one. If
you’ve not already been sent to collections with your credit card
debt, contact your card issuer to make payment arrangements. Most
credit card companies are very happy to work out arrangements with
their customers – they’d much rather have the debt paid off slowly
than not get paid at all. Some companies will suspend interest, late
and over-limit fees as part of the arrangement if you’re up front with
them about your situation and are willing to stick to a payment plan.
If you’ve already been sent to collections, you’ll need to contact the
agency holding your account to make arrangements. Most will
accommodate you if you lay out a clear and reasonable payment plan.
If you can offer a large chunk of money up front as a downpayment,
with a schedule of $X/month thereafter, do so.
As with your small debts, ask the company to report your account as
being “paid as agreed” while you’re making your payments. Be certain
to get your arrangements in writing and stick to them. That’s
absolutely vital! If you can arrange for the payments to be regularly
debited from your checking or savings account, do so. It will be one
less thing you have to worry about.
Once you’ve paid it off entirely, ask for a confirmation letter
stating that it has been reported to the credit bureaus as “paid as
agreed”. Do this with *every* outstanding account you have, and be
certain to get copies of your credit reports a few months later to
confirm that the companies have stuck to the agreement. If they
haven't, dispute the items with the reporting agency to get the
information corrected.
One you've satisfied your debts and corrected any inaccurate
information in your credit reports, you need to get some positive
credit information in there to put you on the road to shiny clean
credit.
NOLO Law Centers offers two sensible suggestions:
"Q: What can I do to rebuild my credit?
A: After you've cleaned up your credit report, the key to rebuilding
credit is to get positive information into your record. Here are two
suggestions:
* If your credit report is missing accounts you pay on time, send
the credit bureaus a recent account statement and copies of canceled
checks showing your payment history. Ask that these be added to your
report. The credit bureau doesn't have to, but often will.
* Creditors like to see evidence of stability, so if any of the
following information is not in your report, send it to the bureaus
and ask that it be added: your current employment, your previous
employment (especially if you've been at your current job fewer than
two years), your current residence, your telephone number (especially
if it's unlisted), your date of birth and your checking account
number. Again, the credit bureau doesn't have to add these, but often
will."
Rebuilding Credit FAQ
http://www.nolopress.com/encyclopedia/articles/dc/dc21.html
In the meantime, be certain to pay any installment loans or credit
card bills *on time*. If for any reason you cannot make a payment on
time, contact the creditor *immediately* to let them know why and when
you expect to pay. If you don't have a credit card, apply for one.
Use it to make small purchases, then pay them off as soon as the bill
comes. An open line of credit in good standing shows prospective
creditors that, even though you've had a few dings in the past, you're
capable of meeting your responsibilities.
NOLO Law Centers explains the usage of credit for the purposes of
rebuilding credit:
"QA: I've been told that I need to use credit to rebuild my credit. Is
this true?
A: Yes. The one type of positive information creditors like to see in
credit reports is credit payment history. If you have a credit card,
use it every month. Make small purchases and pay them off to avoid
interest charges. If you don't have a credit card, apply for one. If
your application is rejected, try to find a cosigner or apply for a
secured card -- where you deposit some money into a savings account
and then get a credit card with a line of credit around the amount you
deposited."
Rebuilding Credit FAQ
http://www.nolopress.com/encyclopedia/articles/dc/dc21.html
You can have your credit repaired in as little as two years if you
stick to your payment arrangements, without having to go through a
costly and often ineffective middleman. Though most derogatory credit
information can stay on your report for 7 years, your creditors may
agree to delete your old account listings once you’ve satisfied your
obligations. All you have to do is ask!
There are a number of consumer resources available to help you, and
unlike consolidation services, they’re all free:
Building A Better Credit Record (Includes sample dispute letter)
http://www.ftc.gov/bcp/conline/pubs/credit/bbcr.htm
Credit Repair: Self-Help May Be Best
http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm
Erasing Bad Credit - Audio Presentation from the FTC (Requires
RealPlayer)
http://www.streampipe.com/ram/ftc/call_for_action/erase_bad_credit.ram
Credit and Your Consumer Rights
http://www.ftc.gov/bcp/conline/pubs/credit/crdright.htm
Know Your Credit Report
http://www.1acs.com/Question1.asp
Rebuilding Credit FAQ
http://www.nolopress.com/encyclopedia/articles/dc/dc21.html
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With respect to finding a good bank, look for a bank with a solid
reputation. Ask for recommendations from your prospective bank’s
current customers. Are they happy with the service they receive? Is
the customer support solid? Do you have 24 hour account access online
(helpful for the busy traveller)? What about liability if your
account is compromised? Is there a 24 hour help line if your checks
or ATM card are lost or stolen? What about international
availability? Are you going to be able to access your money while
overseas? These are all questions you should ask the manager of your
prospective bank.
For wealth management that isn’t going to push you towards the
(currently disastrous) stock market, ask your bank for the name of a
certified financial planner. Many banks employ planners in-house who
will be able to help you decide how to handle your income. They’ll
help you establish good financial goals for both short and long term
savings, including retirement savings, based on your current income,
current financial needs, and future intentions. They typically
suggest insured accounts such as IRAs, CDs and certain Money Market
accounts. What services are right for you depend largely on the
details you provide to the planner.
With a bit of time and patience, you can have your credit repaired and
your financial management straightened around, and in less time than
if you contracted with a consolidation service.
Good luck in your endeavor! If I can be of further assistance, please
just ask for clarification. I’ll be glad to help.
--Missy, who learned these lessons the hard way. |
