Your Credit Score: 550 to 750 in Twelve Months
Joshua M. Adams
It seems like every day that I run into someone who tells me that their credit is seriously messed up, and beyond repair, whether it be from a divorce, student loans or old debts that they never paid off. Everyone thinks that their situation is worse than anyone’s has ever been and that their credit is something that can never be fixed. Does this sound like you? Well, for you, and for all the people that think their credit can never be repaired I have news for you. First, your credit score is never as bad as you think it is, and two, its quite easy to fix it.
First, let’s talk about the three credit bureaus and your credit scores. There are three bureaus that lenders use to check your credit. Some may use more than one, but the majority simply pull from one bureau. About half the time, when you default on a debt, it is reported to all three bureaus. However, the other half it is only reported to one or sometimes two. Each bureau scores in pretty much the same way. Credit scores go from 300 to 850. 300 is dismal credit and 850 is perfect credit. Most people that I talk to think that their credit score is around 300. However, I have taken several of these people by the hand and showed them how to check their credit, and every time it has been in the 500’s to 600’s.
What Does Your Credit Score Mean?
Believe it or not, to get approved for a mortgage, car loan or any other type of financing, all you need, assuming you have the income to make the payments and employment and stable housing, is a credit score of 620 or higher, or in some cases 650. A credit score of 750 will pretty much guarantee that you are approved for whatever you are attempting to finance, and it doesn’t take very long to achieve this kind of number.
How To Get A Copy Of Your Credit Report
So, you’ve seen the commercials on TV and had that annoying band singer tell you how he didn’t check his new wife’s credit and they were forced to live in his in-law’s basement or wear pirate hats while they played, but the question is, can you really get a free copy of your credit report. The answer is yes, but not by calling the eight hundred number attached to the next catchy jingle that you hear. The law allows for two instances where a person can obtain a totally free credit report. A) Once per year no matter what and B) When they have been turned down for financing, based up what was on their credit report, assuming they file the request within the allotted period of time.
The official site for the free yearly report is http://www.annualcreditreport.com. You’ll have to verify some information so that they know it is you requesting a copy of your report and they do have a function for online viewing. However, if you are going to seriously work on your credit then I recommend going instead with a paid credit report company. The free credit report that you purportedly get when you call the company affiliated with the band is not truly free at all, since you have to enroll in their triple advantage monitoring plan to qualify.
What you want is a site that will let you pull a fresh copy of your report whenever you want, so that you can see how your efforts are affecting your scores. You also want a company that lets you view all three at once, in an easy to read way. The only company that I have found is a company called Credit Check Total. I won’t include a link lest someone think I am hawking an affiliate product (I’m not) but I do recommend them, and use them myself. It’s twenty bucks a month, but you can look at your credit report as many times as you want and whenever I have had a question it’s easy to get them on the phone and get an answer.
What To Do With Your Report Once You Have It
The first thing that you’ll want to do is sit down and make a list of your debts. I would separate them into three categories, which I affectionately call Probably, Possibly and Hell No. The ones in the probably list are the ones that you know you can pay off in one lump sum. The Possibly category are ones that you may struggle with and the Hell No’s are for big debts that we know we just can’t pay.
Now, go through your list and cross off anything that the most recent date of activity is six years old or more. These debts will drop off by the time our twelve months are over, so we don’t need to worry about them. One exception to this rule is a student loan, which will never fall off your credit report until it has been paid in full.
Now, take a pen and paper and make a plan to pay off all of the probably ones over the next twelve months. You’ll want to pay them off in one lump sum, we’ll go into why later, so make sure that you allow for that. If you only have $100 a week you can spare to pay these debts and the amount owed is $400, then allow four weeks for that particular debt. Remove the probably’s from your list.
Now, look at how much money you have left over and determine if you can pay off any of the possibles. If you can, make a plan for those and remove them from your master list. Now, you should be left with a few possibles and one or two Hell No’s. We have a plan for these, don’t worry.
En Route To a 750 Credit Score….or…The Plan
There are two ways to remove negative items from your credit score, and one isn’t to pay them. At least, not just to pay them. There is a process for paying off your debts and if you head into this venture gung ho and start calling up every creditor on your list, you’ll do a lot more damage to your credit score than is already done. First, let’s discuss the two methods of removing negative information.
Method One: Pay the creditor, and request that they remove the negative information. Basically, they withdraw their submission of unpaid debt. Some will tell you that they are unable to remove the information and if they are the original creditor, this is utter horse dung. They are perfectly able to remove it. Now, be forewarned, you may have to get tough with some of these creditors and explain that you are attempting to clean up your credit. Tell them that you are making those creditors who are willing to remove the negative information for payment of the debt a priority and if they refuse to remove it, then you will be forced to put them at the bottom of your list. They may threaten to see you in court and garnish your wages and take your first born baby, but in fact 99.9% of the time they will do nothing of the sort.
A different situation exists if the original creditor has charged off the debt and sold it to a collection agency. You’ll know if this has happened, because when you call the original creditor, they will tell you to call so and so collections. Do not plead or argue with the original creditor to remove the debt or take your money. It will not work. As far as they are concerned you no longer owe them money, your debt was paid by the collection agency that bought your debt. Instead, simply thank them, hang up, and move that particular item to the Hell No column.
When we begin the plan, you will call one creditor at a time from your list of probably’s, only AFTER you have the money in hand to pay the debt in full. You will then attempt to negotiate a settlement for complete removal of the negative information from your credit reports (however many it exists on) and get that promise in writing from them, as well as the settlement amount. When you have it in writing, you pay that creditor and you move onto the next one.
Method Two: Obviously, we’re not going to be able to pay everything on our credit report in most cases, so we have a different method for dealing with these debts. You are going to dispute them. Pick one debt per two week period and send a certified letter ( not a phone call, a letter) to the credit bureaus that list the debt and dispute it for whatever reason you can think of. You can say the dates are wrong, the amount is wrong or the debt simply isn’t yours or it was paid.
A law exists that credit bureaus must remove negative information if the customer disputes it, and the company that listed the debt doesn’t prove that the debt is owed and is correct within thirty days. Most companies fail to send it off within the thirty days and many may not even be able to find the records, especially if the debt is a few years old. However, if you send in too many requests at once you will be flagged as a frivolous disputer, and you won’t get anywhere. Send one debt in every two weeks, or even more spaced out over the year period if you only have a few.
These two methods combined are going to remove almost all of the negative information from your credit report and will bring the score up considerably. However, we are not finished. At the same time that we are removing negative information, we’re also going to rebuild your credit.
Rebuilding Your Credit: The Final Hurdle
The very first month that you begin this program I want you to beg, borrow or steal $300 and get yourself a secured credit card. A secured credit card is one that works exactly like a credit card, but with the credit line secured by a cash deposit, which you usually receive back within a year of using the card responsibly. This is not a debit card. The money you secure it with is not yours to spend, it’s your collateral to obtain this credit card. There are many companies that offer this service. Before you go shopping for one, I want you to find one that meets the following criteria as closely as possible.
Reports As A Credit Card NOT as a Secured Credit Card
Reports To All Three Bureaus
Reports Minimum Quarterly, preferably monthly.
The first is non negotiable. You must find a card that reports as a regular credit card otherwise you will benefit very little from what we’re about to do. The second is almost as important, since we never know which credit bureau a potential lender will pull from. The last, monthly or quarterly. Make sure it’s one or the other.
Now, begin using the card to buy something each month that you were going to pay cash for. Put the cash away and when the credit card bill comes, for gosh sakes pay it.
Rinse and Repeat in month three. Yes, I’m telling you to come up with another $300 and get a secured credit card from a different company. Use it the same way, spending say $10 a month and paying it off immediately when the bill comes. No late payments, no “I’ll pay it next month” and NO PAYING THE MINIMUM. Pay the entire bill off each month on both cards.
Finally, in about six months you’re going to go shopping for a store credit card. These are quite easy to get with very little of a credit history and you should be able to get one quite easily. Then, use it just like the secured cards until the end of the twelve month period.
Use the credit checking website you joined up with to monitor your credit as you pay off debts, get them removed and dispute others. You will also see good payments begin to appear and your score will begin slowly climbing up, gaining more and more momentum. With these steps, you should be able to move from 550 to 750 in a year. Good luck with your journey!
Your greatest success and triumph lives next door to your greatest fear.