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A bad credit file is stressful to deal with. It’s an obstacle that often stops you from accessing affordable financing. These 6 steps will help you get started on the process of credit repair:
1. Look for Errors
Believe it or not, errors are common on people’s credit files. It’s important to check your credit score at least once a year. If you don’t check, you’ll never know what mistakes could be holding your back. For some people, this is the only credit repair step they’ll need to take.
Get a copy of your credit file and make a note of any suspicious or incorrect information. Contact the credit reporting agency you got the report from first to see if they can solve the problem. If they’re unable to make the corrections, contact the lender in question and initiate an investigation. This part of the credit repair process can be long and frustrating, but you must stay on top of them to make sure they make the appropriate changes. If after a reasonable amount of time the lenders still haven’t made the corrections, contact an ombudsman, they may be able to step in and move things along. If you’re still not making progress with an ombudsman, your final call should be to the privacy commissioner. You’ll have a year to file your complaint from the time you became aware of the problem, so don’t forget.
If you’re feeling overwhelmed just thinking about this process, credit repair services can carry out many of the above steps on your behalf. They are typically able to use their knowledge and experience to get things done faster. Credit repair services may also provide debt consolidations or debt agreements as part of their services, so you may want to consider that as well.
2. Negotiate With Your Creditors
If you’re having trouble making payments on time and it’s affecting your credit score, there are a number of ways you can negotiate with lenders to stop the problem from getting any worse.
Some of the things you can negotiate include:
- a lower interest rate
- a lower monthly payment
- a break from payments
- debt consolidation
- a consumer proposal
Bankruptcy is not great for your credit file and it should be considered a last resort. However, there are many situations where it is better than not taking action. If your past due payments just keep piling up, and your credit score keeps getting worse, it may be worth looking into. Credit repair services may be able to assist you with negotiating.
3. Put Your Bills On Autopilot
Even the most organized people can miss a bill payment here and there. Those of us that are forgetful, or are juggling multiple debts are even more likely to have problems paying on time, compounding our bad credit. Managing multiple bills and debt payments can also be very stressful. One simple solution is to automate your bill payments. There’s no need to manually make payments each month. Instead, use pre authorised debit to take it out of your hands. This way you’ll never put your credit score at risk by missing a payment.
4. Add Positive Information to Your Credit File
Lenders don’t often forget to report negative circumstances to your credit report, but they don’t usually add any positive stuff either. Add as much positive information to your report as you can, it’s a lot easier than getting negative information removed. If you’re married, or you’re a home owner, this can help improve your score. If you’ve been with the same employee for a while, add that too. This is exactly the type of credit repair lenders like to see.
5. Maintain a Good Credit Track Record
In the long run, you likely want to develop a solid credit history with a great score. The only way to do this is to demonstrate your ability to manage money effectively and be responsible for your financial obligations. However, many people with bad credit struggle to show this improvement because they are unable to take on more debt obligations. By taking a debt consolidation loan, or a non-conforming loan, you can lower your monthly payments—improving your financial situation—and by making the payments, you can demonstrate how responsible you are. Making payments on time every month will help you develop a positive track record that will ultimately improve your credit score.
You should only take on additional debt if you are certain you can make the payments. In order to be effective, it’s important to develop solid financial habits. Make sure you:
- spend less than you earn
- don’t take on expensive forms of credit unnecessarily
- avoid making any late payments
- keep a close eye on your cash flow
6. The Final Credit Repair Step: Follow up!
Once a debt has been paid, the lender must update your credit file within a reasonable amount of time—it’s the law. Check your credit history at least once a year, and more often if you’re trying to improve your credit score. You’ll want to make sure that all paid debts have been removed and errors have been removed. Just be aware that any default payments will remain on your credit file for five years, even after they’ve been paid.
Follow these six steps to credit repair and you’ll be well on your way!