10 Common Credit Repair Mistakes You Can Make

FT Contributor  | 

If you’ve struggled with managing credit in the past, you may be considering credit repair as a way to heal your finances — and with good reason. Repairing your credit is one of the quickest ways to improve your financial situation. However, it’s important to keep in mind that credit repair can be very difficult and even overwhelming at times.

Regardless of whether you’re working with a trustworthy professional credit repair company or you’ve decided to handle your credit repair on your own, it’s important that you go about the process correctly. Here are 10 common credit repair mistakes that you should be careful to avoid if you want your efforts to be as positively productive as possible.

1. Not Repairing Your Credit

It may be obvious, but it doesn’t change the fact that not repairing your credit at all is perhaps the number one worst thing you can do.

Once you’ve begun your attempts to repair your credit, resist the urge to postpone the effort until a later date or even give up entirely. Sure, at times it may make sense to wait as part of a larger strategy — such as if you wait two years for a hard credit inquiry to clear from your credit report.

However, for the most part, you should maintain a proactive posture when it comes to fixing your credit.

2. Lying or Falsifying Documents

Lying to cover up an embarrassing mistake is a common human behavior. However, it should never be utilized when you’re trying to repair credit.

If you find accurate information on a credit report, it’s absolutely essential that you leave it unchallenged and report it exactly as is. If you attempt to falsify information that you know is correct by disputing something on your credit report or reporting a fact incorrectly on another document, it’s highly unlikely to do you any good.

Even worse, it can ultimately land you in a world of legal trouble as well. Instead, remain open and honest as you go about facilitating positive change.

3. Closing Credit Accounts

If you’re struggling with bad credit, you may go through a fanatical moment where you consider cutting up your credit cards and shutting down your accounts. However, this is actually likely to cause more harm than good.

If you close a credit account, it will decrease your credit utilization ratio, which can impact nearly a third of your credit score.

For instance, if you have $15,000 in available credit and you’ve used $7,500, your credit utilization score is 50%. While this isn’t ideal, if you close a credit card with a $5,000 limit, it will reduce your available credit to $10,000. This will instantly raise your credit utilization ratio to 75%, making it look that much worse to the credit bureaus who generate your credit score and credit reports.

Instead, strive to leave old credit accounts both open and unused.

4. Overusing Balance Transfers

If you’re struggling to make a credit card payment, you may try to use https://depositphotos.com/ in order to dodge interest payments. Utilizing this strategy often, though, only postpones the inevitable.

Besides, if you lean on this tactic regularly, you’ll consistently add to your overall debt by paying balance transfer fees. Instead, save this as an option of last resort.

5. Missing Payments

While your credit utilization ratio is an important part of your credit score, the one item that can have an even greater impact is missed payments.

Your payment history constitutes as much as 35% of your overall score, which makes missing a payment a very big deal. Not only that, but a missed payment can lead to a derogatory mark, which can remain on your credit report for as long as 10 years.

If you want to heal your credit as quickly as possible, always prioritize making payments on time.

6. Not Using Certified Mail

The way you send your mail may be the last thing on your mind as you attempt to escape from a cycle of bad credit, but it’s actually a critical consideration. Any time you go to send an important letter that pertains to your credit, it’s imperative that you use certified mail — that is, mail that comes with a mailing receipt and an electronic verification that it was either delivered or an attempt was made to deliver it.

Whether you’re sending a dispute letter to a credit bureau, an important payment to a lender, or a letter communicating with a creditor, using certified mail helps to protect you. It gives you solid proof that you did your part of the credit repair process — regardless of whether the mail actually arrives or not.

7. Not Checking Your Credit Report

Not reading your credit report is like assuming that closing your eyes will make something unpleasant go away. It’s simply unrealistic and at times, even dangerous to your credit repair efforts.

Your credit report may be filled with past mistakes and derogatory marks, but it also shows you precisely what the credit bureaus currently think of your credit situation.

Therefore, it’s important to read your credit report regularly in order to ensure there are no errors unnecessarily hampering your credit repair journey. It also gives you further insight into whether your current credit repair behaviors are actually working or if they need adjustment.

8. Filing for Bankruptcy

Filing for bankruptcy means you’re officially claiming that you cannot repay your debts. This is a very bad idea if you’re trying to fix your credit. It will not increase your credit score, and the bankruptcy proceedings will be marked on your credit report for upwards of a decade into the future.

While bankruptcy can and should remain a last resort for your financial struggles, it should never be used as a credit repair strategy.

9. Giving Up on Credit

Choosing to live a credit-less life can be a wise decision for some people. It has many benefits, such as avoiding paying interest or unnecessarily adding to your debt. It also allows you to avoid paying extra fees and can help you maintain healthy spending habits.

When it comes to repairing your credit, though, eliminating credit entirely won’t get you very far. To fix credit, a prolonged and genuine demonstration of healthy credit use is required — which means you’ll still need to make those payments, pay that interest, and keep your credit utilization as low as possible.

10. Not Learning About Credit

Finally, if you approach credit repair as a quick fix and a temporary activity, you won’t get very far in the long run. Building good credit requires lifelong learning and the adoption of healthy credit habits such as paying off your credit cards every month and sticking to a budget.

If you can develop a deep appreciation and understanding of credit, along with good financial habits, you can truly heal your credit situation over the months and years ahead.


Image Source: https://depositphotos.com/