When You Fix Negative Credit, You Can Fix Your Finances

Posted by Chris Blanchet

June 11, 2009

by Chris Blanchet

During these economic times it has become a little more difficult to obtain approval for the credit we seek. A lot of lenders have instated a self-imposed limit on the amount of credit they approve for any given applicant. If you have a sub-par credit rating, that means that obtaining personal credit is not only more of a challenge, but it could be impossible. Luckily, there are some simple tactics you can use to improve your credit score and leave the lender with a more positive impression after making an official credit request.

When it comes time to fix your credit score, there are typically two simple techniques you can use. In the first, you hire a company that will promise to fix your credit. In the second, you take control of the situation and do the leg-work yourself. This second technique saves you money, and it also helps you to maintain a more permanent fix.

How do you fix your credit? You can start with the most recent copy of your credit bureau report which you can obtain through leading credit reporting agencies like Equifax and TransUnion. Next, you should examine your report closely and highlight areas of concern, particularly those that give erroneous or damaging information in your payment history and current credit status fields. Highlight the fields and records that provide either inaccurate information or that have a negative impact on your overall credit score. If you find more than one item, give them a priority ranking with the most-damaging ranked first. You will want to focus on these areas first and file an official dispute with the reporting agency by way of a letter. In this letter, explain the error and give your reason for your disagreement with the information reported.

In accordance with the Fair Credit Reporting Act, you can file a dispute for each negative and incorrect account or item and the credit reporting agency has to review your account and respond to you within 30 days. The credit reporting agency has an additional five days to respond to your dispute. If they fail to do so, or if they are unable to provide a response that proves you are indeed responsible for the way the account has been reported, then the disputed item will be cleared from your record. This will have the impact of improving your FICO score rather quickly.

While it is unlikely that all of the derogatory information will get wiped clear of your credit report, you can reasonably expect to see some form of improvement to your credit score. Even with a slight improvement, you will have a perfect opportunity to fix your credit for long-term, personal finance reasons. Once you see an improvement to your credit score, you should take action and dedicate some effort to managing the remaining aspects of your credit history. This means coming up with a realistic budget that allows for continuous improvements to your financial situation.

In summary, when put a plan in place to fix your credit, start with the most negative records on your credit report. Ideally, paying or clearing those debts is your best option; failing this, considering filing a dispute letter with the credit reporting agency if there is reason to believe the information is inaccurate. Since your FICO score depends heavily on the current status of your credit accounts, place past-due accounts your top priority list. When you fix your credit, you not only increase your FICO score, but you are planning for your future borrowing requirements.

About the Author:

Chris Blanchet is the author of Help Fix My Finances, a textbook about legitimately taking back control of your personal finances, which is the basis of the Members Only program of the same name. You can visit his debt-free blog, How To Repay Debt.

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When You Fix Negative Credit, You Can Fix Your Finances

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