Many Americans are weary of credit repair because a few bad apples have ruined what is actually a valuable financial service. As a result many are attempting to strike out on their own and fix their credit woes. So for those consumers interested in do-it-yourself credit repair, there is a general process you should follow. Below is a wide-ranging checklist.
Step 1: Get Your Credit Reports
You can't know where to begin with the credit repair process if you don't have your credit reports. Accounts on the reports from the three major bureaus are the factors that calculate your credit score. Each of the bureaus - Equifax, Transunion and Experian - will provide consumers with a free credit report every 12 months. Be sure to pull your reports from all three as they may have different items listed.
Step 2: Analyze Each Account
When you do receive your reports, carefully sift through each account to verify that it is indeed yours and that it is 100% correct. Even the slightest mistake can drop your credit score, or keep it from increasing during the repair process. Gather your bills and financial records to crosscheck with what the reports are saying.
The reports aren't always that easy to read for newcomers as they're full of codes and abbreviations in an attempt to keep them as short as possible. If you're in need of help, keep an eye out for credit repair forums, where people who have been in similar situations are definitely willing to help.
Step 3: Dispute Inaccurate Accounts
If you find that there are mistakes on the reports, you need to dispute those accounts directly with the credit bureaus. Again, searching the Internet for sample letters will probably be adequate. The bureaus have 30 days by law to investigate the accounts and either validate them, update them, or remove them entirely.
This cannot be stressed enough: only dispute accounts that are incorrect. Disputing accounts that are indeed accurate is going to notify the collectors that you are trying to get out of paying them. This can make your situation much worse than it was when you started.
Step 4: Determine Total Debt
For accounts that you know are yours or that have been disputed and verified, be prepared to pay them off. If you're really looking to improve your credit score lenders are going to want to see that you've taken care of all of your past debts.
Step 5: Budget and Save
Sometimes this is the hardest step of all, but it is so very necessary. Depending on the amount of debt you are in, you need to start putting away some money to pay that off. You will not be able to open new lines of credit while your reports indicate that you still have outstanding debts.
Step 6: Negotiate Debt
The type and age of your debts will dictate whether collection agencies will be willing to settle your debt for less than is owed. Generally after 6 months of non-payment, collectors are willing to take a reduced payment since they believe that if you haven't paid in that time that they are less likely to get any sort of payment from you.
This is not to say that you should stop paying your bills in the hopes that you'll be able to pay them off for a fraction of what you owed 6 months down the line. If you are truly trying to repair your credit, this is the worst thing you could possibly do. All of the late payments and charge-offs you will incur in the meantime will absolutely destroy your credit score.
Step 7: Open New, Positive Accounts
The consumers with strong credit profiles tend to have 3 to 5 lines of revolving credit. Depending on how many cards you currently have, do-it-yourself credit repair is going also going to involve opening up new lines of credit that will add to your credit score. This is because lenders want to see that you are currently able to use credit responsibly. Look into secured credit cards with you current or local bank.
Step 8: Pay Your Bills
It's amazing that this should even have to be a step for someone repairing their own credit, but you would be surprised how many Americans will let their payments go late. If you're involved in the credit repair process and you're not paying your bills on time, you might as well just stop repairing your credit. Paying your bills on time, over the span of a few years is really the only way to truly boost your credit score.
While not an end-all checklist, this will give you the basics of what you should be doing for your DIY credit repair needs. You're not expected to be an expert from the outset, so if you're confused, ask questions. There are forums dedicated to credit repair and many credit repair companies give free consultations. Seek help when needed, even the simplest mistakes can delay the process or even worsen your situation.
