Most Americans start out in their adult lives attempting to build good credit. It’s just a natural progression for most of us because we all build credit by financing our first car, renting our first apartment, getting that first Visa card and in many other ways that come with growing as an adult and taking on more and greater responsibilities.
Invariably, at some point in many of our lives, we also tend to break down almost anything we have built up and our good credit is not immune to at least some level of personal destruction. I’m not saying that we always damage our good credit intentionally, but the statistics show that nearly 75% of Americans have had at least one derogatory remark on their credit report at some point in their lives, usually within the first 15 years of establishing their first credit account.
The next natural step in the credit process after we have initially built it up, then, for some reason harmed that good credit rating, is of course an attempt to rebuild our good credit that we had established in the first place. Some will go to Credit Counseling services, some will hire credit repair companies and even more will attempt to repair their credit themselves. I, for one strongly encourage people to do their own credit repair for many reasons, however before embarking on such an undertaking, there are at least three very important things that you’ll need to keep in mind when starting a do it yourself credit repair project.
Time is on your side. The most common practice in most credit repair projects is to challenge your negative credit report entries with the credit bureaus or original creditors in hopes that they may be unverifiable and therefore qualified for removal from your credit report. The more time that has passed, the more likely those negative items are to be unverifiable. Additionally, if the attempt at removal fails, the next step is typically to negotiate those debts down to a payoff that is less than what you owe. In the world of collections, a debt is worth less and less as time passes. The longer a debt has been on the books, the less a collector is willing to accept to adjust the debt to a “paid” status therefore in both cases, time is definitely on your side.
Excessive inquiries will hurt your credit score. Typically, whenever you apply for a new account or financing of any type, the issuer will request your credit report from the reporting bureaus. Each of these inquiries are logged and added to your official credit report and will be visible to any other potential lender to see. When a potential lender sees multiple inquiries on your report, it is a signal to them that you have a current or recent pattern of requesting credit and that may look to them as though you could be acquiring too many debts which would inhibit your ability to pay them back should they decide to offer you credit as well. As your credit inquiries increase, you ability to secure new credit proportionately decreases.
There is a huge difference between prepaid debit cards and secured credit cards. Most people with poor credit scores have a difficult time getting approved for new credit cards, however in today’s society, having a credit card with a Visa®or MasterCard® logo is almost a necessity so they are forced to apply for pre paid debit cards or secured credit cards to fulfill that need. Although neither type of card commonly requires a credit check, only the secured card reports your payment activity to the credit bureaus. Both the pre paid and secured cards require an up front deposit when you sign up, however the main difference is in how that money is withdrawn. The pre paid card is much like a checking account debit card which charges your account as soon as you make purchases and once that happens the money is gone. With a secured credit card, your charges are applied against your credit line (equal to or slightly greater than the amount of your initial deposit), but are not billed to you until the end of the month, much like a standard credit card. Once you receive that end of month bill, you can either pay off the total amount or make the minimum payment required by the card issuer. In the case of a secured credit card, those payments are usually reported to the credit bureaus and if made on time, will contribute to the improvement of your credit score. This is a very important distinction when working on rebuilding your credit.
These three important factors are just a sampling of the many things you will want to be aware of before starting your own credit repair and FICO score improvement project. You can empower yourself to do just as good of a credit repair job as any paid professional, however the key to that empowerment is knowledge and these three very important areas of expertise will help you on your way to a new and higher credit score.