Credit Repair Basics

If you are in a situation in which you need to repair your credit, the first thing you you need to do is to find out what exactly is on your credit report. Actually, you need to find out what is on all three credit reports. There are three primary credit reporting agencies that almost all lenders use: Transunion, Experian and Equifax. Your credit score and accounts will be different from report to report. Almost all mortgage lenders will pull all three reports and use your middle FICO score for loan qualification and pricing purposes.

The main point is that you could have credit issues on one report that might not show up on another, so it is very important to monitor all three reports. There are a number of places that you can go online to get your credit reports and scores, and ongoing monitoring services, but they will charge you anywhere from $20 to $50 for the scores and reports and a monthly subscription fee for the monitoring.

Everyone is entitled to view all three of their reports at http://www.annualcreditreport.com/. There is no charge, but if you want to see your scores, you will need to pay a little bit. It is still a very good idea to go ahead and look at the free reports even if you are not willing to pay for the scores. You should review the reports and look for the items that are negatively affecting your credit. If you have charge offs or late payments, the only remedy for that is time. The negative items---with the exception of bankruptcies---will fall off your report after 7 years. However, you need to review the reports to make sure that there are no negative items that are over 7 years old that are still reporting. This has been known to happen, but you can dispute the items on the basis that they are past the 7 year mark and get them removed.

Again, the first step toward repairing your credit is to know what exactly is on your reports that is affecting your score. The next step is to get your finances under control to the point that you are able to meet your monthly obligations. Easier said than done for most people, but spending less than you make is the basis of financial health and the building block of good credit. You have to be able to meet the monthly obligations on time to re-establish good payment history.

A quick way to boost your scores is to pay down or to pay off credit cards and charge cards. Your score will drop when your balance exceeds 50% of your total credit limit. Paying your balances down under 50 % will give you a quick score increase. The best way to do this is to focus on one credit or charge card and pay as much extra over the minimum monthly payment as you can until it is paid down or off. Once it is paid off, roll the monthly amount you were paying on that card into the monthly amount you are paying on another card. Obviously, this does not reduce your monthly obligations, but it dramatically reduces the amount of time it takes to pay off your debt and will save you large amounts of money in interest charges.

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