Tips for Credit Triage

Many homeowners or prospective homeowners find themselves in less than stellar credit situations. Job losses, medical bills, divorce, student loans…there are a number of reasons why good people may find themselves on the low-end of the credit scale.

Credit is such an integral part our financial lives. Poor credit scores can hamper your ability to get a mortgage, car loan, credit cards, and even a cell phone. If you find yourself in this situation, look on the bright side: there is nowhere to go but up!

To improve your scores though, it’s going to take some work. You may be tempted to use one of those credit repair companies for a “quick fix”. I hate to burst the bubble, but there are no quick fixes. And everything the credit repair companies will charge you a small fortune for, you can do yourself with some focused effort. So save your money, and put it toward paying off your debts.

Step 1 – Don’t Hide  

If you are going to face this head on, you will need to get copies of all your credit reports, no matter how ugly they may be.  Get copies of all three (Trans Union, Experian, and Equifax), because it is possible that each one may have different information, depending on where your creditors choose to report.

Step 2 – Make a List of What to Address

Look for the following information in your credit report and make a couple lists:

  • Errors: Make a list of any errors you note on the reports.
  • Potential Identity Theft: Check for any accounts that you didn’t open. This may take some digging, because some store credit cards or collection accounts may appear as a different company on your credit report.
  • Issues to fix: Make a list of all delinquent, charge-off, and collection accounts, as well as any accounts that are over the credit limit.

Your strategy for repairing your credit will entail addressing the items on these two lists.

Step 3 – Dispute the Errors

Each credit reporting agency has an online form to dispute errors. You will want to dispute each one separately. If you don’t mind paying for postage, should actually send snail mail letters to each credit reporting agency, certified mail with signature required. This will create a paper trail, should you ever need to show proof of your dispute.

Step 4 – Report potential fraud

If you find cases of potential credit fraud or identify theft, then follow the procedures on https://www.identitytheft.gov/ to report the issue.

Step 5 – Fix Derogatory Items

Once you have reported any errors and potential identity theft, you can set to work to fix any other outstanding items. Start paying everything on time. Reach out the creditors and collection agencies to work out a plan to pay your delinquencies. If the balances are large, you may have to work out a payment plant or the creditor may agree to settle for a smaller amount.  You will also want to pay down any debt that is over the credit limit, as these are also negatively impacting you.

Even after you do all these things, rebuilding your credit will be a gradual process. Some derogatory items will take up to 7 years to be removed from your report, but the negative impact will become less over time. The more you pay on time, and the more delinquencies you clear, the faster your scores will turn around.

Step 6 – Continue to monitor

Keep monitoring your credit report. The successes will help you stay engaged in the process and less likely to cheat. If something pops up unexpectedly on your report, address it right away, rather than letting it languish and cause further damage to your credit.

This will be tough, and sometimes it may feel like you will never dig yourself out. But it can be done, and you will be better off financially, and have more flexibility, once you buckle down and do it.

Whether you are looking to buy or sell a home in Northern Virginia, we are always here to help! If you are unsure of your home’s value or if you are thinking about buying or selling, contact Jason at 703-298-7037 or SandersNoVA@gmail.com.