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Five Practical Steps to Repair Your Credit

Bad credit can do more than just mess up your probability of obtaining a credit card. Bad credit makes it more difficult (and more expensive) to buy a car, buy a home, and can even hurt your chances of being hired at a company that you want to work for. Every mistake that you make when it comes to your credit can follow you, making it difficult for you to become truly financially secure.

Five Practical Steps to Repair Your Credit

Seem unfair? Think about it this way. Your credit is a reflection of your spending and repaying habits. It’s how creditors determine how likely you are to pay them back for loans. If you have a history of late payments and/or failure to repay your loans, then potential creditors are not going to see you as financially responsible.

If you have bad credit, you can change your financial future dramatically by learning to repair your credit with these simple steps.

Obtain your credit report

Too many consumers still don’t know that they have the right to view their personal credit report. The law states that consumers may have access to their personal credit reports from all three credit reporting bureaus once per year. There are plenty of websites that will help you obtain this free report (just don’t let them trick you into paying for it.) You should do this every year, even if your credit is not bad, in order to keep the information on your report updated and free of errors.

Dispute any errors

Identity theft, mistakes made by creditors, and other factors may lead to errors on your credit report. Once you receive your report, you need to review it carefully for any errors, such as incorrect information, incorrectly reported late payments, or accounts that aren’t yours. File disputes against any errors. The credit reporting agency will review the disputes and remove any true errors.

Learn your rights

Consumers have specific rights under the Fair Credit Reporting Act (FCRA). You can download a full explanation of these rights from the Federal Trade Commission’s website. Included in those rights are the rights to view your information, dispute incorrect information, and seek damages from violators. The FCRA also protects consumers by making it illegal for reporting agencies to continue to report outdated information. If negative information on your credit report is over seven years old as defined by law, then it should not appear on your credit report.

Repay your loans

In order to repair your credit, you are going to have to repay what you actually still owe. Once you’ve corrected any errors that appear on your report and have determined what you are no longer liable to pay, repaying what’s left should be your target. Start by catching up all accounts that have late payments due. Once your accounts are up to date, try paying a little extra on the accounts that have higher balances.

Limit credit report views

While you’re trying to repair your credit, limit the amount of times that you apply for new accounts. While it may be tempting to take advantage of that rising credit score, each inquiry for a new loan affects your credit score. Having more than two inquires a year will start to negatively affect your credit.

Don’t think that you can just ignore your bad credit. Having bad credit is a serious problem, if your goal is financial security. Even if you make a lot of money, the extra interest that you have to pay when you have bad credit means that you’re throwing money away left and right: money that you could be saving.

It’s best to face your bad credit head on and take the steps that you need to take to fix it. The sooner that you start to work to repair your credit, the sooner you’ll be able to leave behind the stress and financial disadvantages of having bad credit for good.

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