Do-It-Yourself Credit Repair: A Step-by-Step Guide
How I raised my credit score from a 542 to an 804.
Hey, ya’ll! I'm here to teach you how I turned my credit score from a not-so-great 542 to an impressive 804. Yep, you heard that right! I'm going to show you how you can repair your credit all by yourself. No need to stress – it's simpler than you might think. Let's dive into the step-by-step guide that helped me, and it'll help you too.
The Importance of Credit Repair
They say no credit is the same as bad credit, but in my opinion, having no credit is better than bad credit. You know why? Because it gives you a chance to prove to lenders that you are trustworthy and can easily manage your money. I started my credit journey at the age of 19, and little did I know, I had a lot to learn. The first time I applied for a loan, I was denied on the spot. The reason was because my credit score was 542. But how? I had never used my credit in any way, so my credit profile should have been clean.
*actual photo of my credit score
I was determined not to let this setback define me. I knew I could do better. I refused to live the rest of my life with bad credit. So, I did what I do best – I researched my way into credit repair. And you know what? I learned so much about credit scores and how to fix them. Want to know how? Keep reading!
Recommended Read: Why You Shouldn't Close Unused Credit Card Accounts
My Credit Identity Mix-Up
I learned a lot about my credit scores and why my credit profile was so negative. The credit bureaus considered my sister and me to be one person instead of two! Our names are similar, and our social security numbers are identical to a T minus one number difference. That mix-up was dragging down my credit score, and I was determined to set things right.
Now, let's dive into the good stuff – the steps that turned my credit around and can do the same for you.
What Is Credit Repair?
Credit repair is the process of improving your credit score by addressing negative or inaccurate information on your credit report. A credit score is a numerical representation of your creditworthiness, which lenders use to assess the risk of lending money to you. A higher credit score indicates a lower credit risk, making it easier for you to get loans, credit cards, and other forms of credit at favorable terms.
The following five factors determine your credit score:
payment history (35%),
amounts owed, also known as credit utilization (30%),
length of credit history (15%),
new credit (10%)
credit mix (10%)
Repairing your credit is crucial for a variety of reasons. When your credit score is higher, lenders see you as a dependable borrower, which translates to lower interest rates, higher credit limits on credit cards, smoother loan approvals, and more. Moreover, a healthy credit score can significantly enhance your chances of buying your dream home or landing the desired job. (Yes, some jobs check your credit score before hiring, especially if you want to work in the financial industry.)
DIY credit repair has major benefits:
First, You can save money by avoiding the costs associated with credit repair companies. Instead of paying unnecessary fees, you can use the money being saved to improve your financial situation by repairing your credit.
The next step, taking control of your credit repair journey, provides you with a solid foundation of control and understanding. Examining your credit reports carefully gives you knowledge of all the factors affecting your credit score, helping you to make wise decisions.
A personalized approach is another benefit of undertaking credit repair on your own. This means you can tailor your efforts precisely to your unique credit issues, addressing areas that need the most attention and focusing your energy where it matters most.
Additionally, being proactive in addressing errors and negative items demonstrates a commitment to timeliness. By taking swift action, you can avoid delays and start paving the way toward an improved credit profile sooner.
Lastly, the DIY credit repair process offers you a valuable educational opportunity. As you work through the steps, you'll acquire essential skills in credit management and financial responsibility, which will serve you well beyond the repair process.
As you embark on the journey of repairing your credit, the first step is to get your free credit report. Gaining access to this report from each major credit bureaus—Equifax, Experian, and TransUnion—sets the stage for a comprehensive assessment of your credit standing. This report will provide crucial insights into your financial health, allowing you to identify any discrepancies, inaccuracies, or negative items that might be dragging down your credit score. Armed with this information, you'll be better prepared to take the necessary actions to improve your creditworthiness and secure a more stable financial future.
Credit Repair Services
A credit repair company does the same thing for a fee that you can do on your own for free. So it would be a good idea to take the money you were considering paying someone to fix your credit and put it toward paying down or paying off any debt you may have. Here are the steps that I used to repair my credit:
Step 1: Get Your Free Credit Reports
First things first, you need to get your hands on your credit reports. You can order your free report at Annualcreditreport.com. It is important to check your credit score at least once monthly. Not checking it could lead to negative information being reported, thus decreasing your credit score. It could also help spot identity theft. This is when someone steals your personal information and uses it to buy things in your name without your permission.
You want to review all three reports and check for any mistakes or incorrect information. Visit IdentityTheft.gov to file a report and receive a customized recovery plan if you believe someone may be utilizing your personal information.
Recommended Read: Credit Score 101: What Is A Credit Score
Step 2: Identify Any Errors
Now that you have your credit reports, you have to play detective. Look carefully for any mistakes. Small mistakes matter.
It is considered an error if your name is misspelled or shows up multiple ways. If you have multiple addresses, phone numbers, job occupations, and dates of birth listed, these are also considered errors and bring down your credit score.
Do you see an account that you didn't open or payments you know you made that aren't showing up? If your report shows late payments, but you know that you made all of your payments on time, you can get it corrected. If you spot any problems, you can tell the credit companies about them. They have a special way to fix things called "disputing." It's like telling them, "Hey, this isn't right, can you fix it?"
Step 3: Make Timely Payments
Making your monthly payments on time is the biggest portion of your credit score. That is why this factor is super important! When you pay your bills when they're due, it shows you're responsible. This helps your credit score tremendously! Set reminders on your phone or enroll in auto pay to remind you when your bills are due. You can also use a calendar to keep track of upcoming due dates.
Step 4: Consider Getting a Secured Credit Card
A secured credit card is like a training credit card. You give the bank a small amount of money (sort of like a deposit), and they give you a credit card with a limit equal to that amount. You can use it to buy things, just like a regular credit card. This helps you learn how to use credit responsibly. You use and pay it off in full each month for six months. You get your deposit back and a higher credit limit at the end of the six months.
If the bank you have your card through doesn't increase your limit after six months of on-time payments, you can call them to request an increase. I do this every six months for each of my credit cards. The key is to use and pay off in full each month and on time. If you can't pay it off in full, using your credit card is not a good idea.
If you want to establish credit but are too afraid of going overboard with a credit card, try placing a small bill on your credit card and setting up auto-pay on the due date. Put the credit card in a safe place other than in your purse or wallet. My highest credit card limit is $13,0000, but I only use $85 per month, and that is to pay for my internet and TV streaming services. It is paid off in full each month and on time.
Step 5: Reduce Your Credit Utilization
Think of credit utilization, like how much of your allowance you spend. If you have a lot of money but spend almost all of it, it doesn't look so good. The same goes for credit – using a lot of your available credit can hurt your credit score. Your credit utilization ratio is the next biggest factor in determining your credit score. It is worth a whopping 30%! That means, if you can help it, try not to use more than 30% of your credit card limit.
From my example above with my $13,000 credit card. My credit utilization each month is well below 30%. I can use up to $3,900 without negatively affecting my credit score, but I get nowhere close. I'm not perfect, and I am not trying to teach you how to be perfect. Sometimes I do go over. However, if you can help it, stay below the 30% mark.
Step 6: Be Patient
There are many credit repair scams out there that promise a high credit score within days or even weeks. That is not the case in the real world! It takes time to recover from low credit scores. It takes the credit bureaus anywhere from 30-45 days to respond to a dispute. I did not see my credit score increase until around the 6-month mark.
It took me from the age of 19 to somewhere around the age of 28 to get into the 800 credit score club. I walked into my 30's with no debt and an 804 credit score. Repairing your credit is like growing a plant. It takes time. Sometimes, it might feel like your plant isn't growing, but if you keep taking care of it, it'll get bigger and healthier. The same goes for your credit score. Be patient and keep doing the right things; your credit score will improve over time.
Bonus Tip:
According to the Fair Credit Reporting Act, you should make disputes by certified mail instead of online. Why? One reason is that sending certified mail requires a signature upon receipt. Credit bureaus can't deny that they did not receive a dispute letter if they signed for it. Another reason is that you are giving up some of your legal rights to your credit dispute by disputing online. Additionally, it is always wise to have a physical paper trail in case technology decides to do what it does best.
Just like learning new things, improving your credit takes practice and patience. By following these steps, you're on your way to becoming a credit repair expert! Keep up the good work, and watch your credit score improve. You've got this!
Recommended Read: 5 Ways to Increase Your Credit Score Without a Credit Card
Money Takeaway
Congratulations! You've made it to the end of our DIY credit repair journey. By following these steps, you've shown that you have the power to take control of your financial future. But wait, there's more! Let's wrap up with some important tips to keep you on the right track as you continue your credit repair adventure.
Tips for Staying on Track with Your Credit Repair:
Stay Organized: Keep all your credit-related documents in one safe place to easily check your progress.
Set Reminders: Use your phone or a calendar to remind you of payment due dates and other important tasks.
Stick to Your Plan: Make a plan and stick to it. Consistency is key to improving your credit over time.
Monitor Your Progress: Regularly check your credit reports to see the positive changes you're making.
Stay Informed: Keep learning about credit and personal finance to become a credit-savvy individual.
Now, here's something extra special for you. If you're ready to take your credit repair journey to the next level, I've got a free gift just for you. Remember that "dispute" thing we talked about? Well, I'm offering you a free copy of the dispute letter I used to repair my credit. Just shoot me an email at humblehustlefinance@gmail.com, and I'll send it right over to you. This letter could be your secret weapon in fixing mistakes on your credit reports!
Lastly, if you're hungry for more information on credit repair, some fantastic resources are out there. You can check out the Federal Trade Commission(FTC) website, visit the Consumer Financial Protection Bureau (CFPB) site, and explore the major credit bureaus' websites – Equifax, Experian, and TransUnion. These sources are like treasure troves of knowledge to help you become a credit repair expert.
Remember, your journey to better credit is like a story you're writing for yourself. With the steps you've learned and the determination you're showing, you're shaping a brighter financial future. Keep up the great work, and may your credit score rise higher than you ever imagined. Here's to your financial success and your newfound credit confidence!
