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Improving your credit can be daunting but don’t jump into expensive counseling right away.
It used to be said that money makes the world go round. Today the better phrase may be “credit makes the world go round.” Your credit score is a factor in everything from buying a house to applying for a job, and a low score may seem impossible to fix. Because of the mystery behind credit reporting, many people turn to expensive credit counselors to fix their low score.
According to a recent survey by the Consumer Federation of America, more than half of respondents thought credit repair agencies could help fix errors and raise credit scores fast. Unfortunately, the Federation also found that these companies usually over-promise raising scores and do a lot of things the average consumer can do on their own.
Check out what credit-fixing companies might charge you a few hundred dollars to find out.
The first thing a credit counselor would have you do is get a credit report. You can’t start to raise your score if you don’t know what it is and what’s causing the problem. It’s important to closely read the report and find out what accounts are overdue and hurting your score.
Another important reason to get a credit report is to check for errors. A 2009 study by CBS revealed that nearly 4 in 5 credit reports contain an error of some type. Although some errors are as simple as a misspelling, others can really hurt your score. Accounts you’ve paid off may still be listed as due, credit limits may be misleadingly reported and accounts older than 7 years may still be appearing after their drop-off deadline. Check for these errors and have them fixed immediately.
Don’t forget to call collectors and ask for a lower rate or a reduction in late fees and interest charges.
One of the first things a credit counselor will ask you to do is call your credit card and loan companies to reduce your balance. Although the process isn’t a guarantee, you may be able to have a considerable amount of late fees and finance charges lopped off your amount owed. Not only will owing less help raise your score, the lower balance will be easier to start paying off.
This seems like a no-brainer, but many people feel so overwhelmed by the flood of mail and phone calls about owing money they never actually get to the act of paying off debt. Sit down and open all of your statements and find out exactly how much you owe and come up with a plan to change your budget to start paying off at least the minimum on all your dues. If you have several payments to start making, it may be a good idea to set up an automatic payment system.
Understand that credit repair is a process and won’t happen overnight.
The most unfortunate fact of credit repair is that it takes time. Although credit counselors may promise to raise your score a hundred points fast, the reality is that raising your credit score a considerable amount can take months or even years.
Don’t let these tips discourage you from seeking legitimate help rebuilding your credit before applying for a loan or in general, but let it serve as a warning that companies promising hundred-point jumps in your score in exchange for a few hundred dollars may have you do things you could have done yourself for free. Use that extra money to start paying off your debt.
Images courtesy of Hakan Dolstrom, Dominik Syka & mrsstickypants.
2 Comments
The funny thing about these credit services is they won’t pay off your debt for you! They actually don’t provide any service that you can’t do yourself. You can get everything for free through sites like credit karma and annual credit report
I agree with PF Pro. Do it yourself. Research how others are making it happen and don’t be afraid to negotiate with creditors. Read Dave Ramsey’s book for advice on doing it yourself.