Credit repair | do-it-yourself tips

June 19, 10:10 AMAtlanta Mortgage ExaminerLeslie Davis

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Back in my teens and early twenties I was not a particularly financially responsible person. Though my parents always gave me impeccable advice, I rarely heeded it. I was living paycheck to paycheck. I didn’t have enough money to cover my basic expenses. Bills got paid, but I was often late. Credit cards were an irresistible temptation to be an idiot. I had no idea what a credit score was, how it was determined or why it mattered. I was taught math, english, typing and dodgeball in high school, but no basic financial management skills, i.e. bank accounts, the concept of saving or the nuance of credit scores. As a result my credit scores plummeted. I spent most of my early 30s getting them back over 700. 

1. Review your credit reports. There are three bureaus: Equifax, Experian and TransUnion. Look for accounts that aren’t yours, inaccurate reports of late payments, ancient bankruptcies that linger as 'due' long after they have been resolved, name variations, addresses or employment information over 4 years old and other negative information that is older than 7 years. Dispute any errors that you find. The FTC provides a free guide about disputing credit inaccuracies.
2. To have good credit scores, you must have credit. If you have no credit cards and no loans, your scores are probably zero. Zero is not bad credit…it is NO credit. Major credit cards, retail cards and gas cards can help establish credit. If the temptation to live beyond your means concerns you, get a secured credit card that acts as a debit card on your bank account.
3. Carrying credit card balances is not the same as using credit. Most people with high 700 or low 800 scores pay off the balances religiously. In doing so they avoid the interest associated with using the credit and boost their scores.
4. If you have existing debt, the best way to get the scores up is to pay down the debt. If you do carry credit card balances, spread out the debt over multiple credit cards. Opening new lines of credit involves credit inquiries. This will have an impact, but it will be offset by the benefit of low balances, assuming that is possible. Sometimes there is too much debt involved to pursue this tactic. If you are already close to the limit on several cards, it is not a good idea to apply for additional credit. It would do more harm than good.
5. The credit scores are sensitive to how much of your available debt you are using. Using 30%, or less, of the available balance will minimize the impact, but to maximize your scores you should keep the balances under 10%. However, the credit bureaus evaluate available credit. If you have a large number of credit cards, loans, etc., you may be perceived as a credit risk due to having access to a large amount of credit. If you already have several credit cards with low balances, considering transferring funds with an eye to the 30% rule and reducing the number of credit cards at your disposal.
6. Credit card issuers are reducing credit limits and increasing the interest rates dramatically, leaving the consumer with a balance over the limit and a higher monthly payment. This can be a disaster for credit scores. If your issuer changes your terms, try to negotiate with them. If they are unwilling to reverse the changes, take your business elsewhere. 
7. Be careful when closing credit card accounts. If you close an account with a balance, it will hurt your credit score until you pay it off in full. If you have had an account for a long period of time, with a good payment history, you may do more harm than good by cancelling it. You can still transfer the balance to circumvent changes by your current issuer.
8. Arrange automatic payments for every card or loan. Paying your bills on time is critical to establishing good credit. Most banking institutions offer online bill payment. This insures that you won’t get busy, overlook a utility bill and end up paying higher interest and premiums for years thereafter as a result.
9. Don’t allow disputed items to go to collections. Though I sympathize with the outstanding medical bill that the insurance should have covered and the frequent payment disputes with cell phone carriers, collections damage your credit. When an account is referred to collections, the black mark on your credit can take years to resolve. You will be paying higher interest rates on all forms of credit in the interim, i.e. mortgage, vehicle and insurance.
10. When you are repairing your credit yourself, it takes time. Credit bureaus only update once a month. When you pay off a liability, that individual or company has 30 days to report it to the bureaus. The bureaus can take another thirty days to update your credit. The potential for nothing changing is high. Make copies of all receipts, payoffs and correspondence, because it is not unusual to reference them repeatedly. Diligence is key.
11. If you have a bankruptcy or foreclosure, you can get your scores up significantly over several months, but you will have to wait until the negatives drop off before you can access the most favorable rates. 24-48 months is the normal time frame in the mortgage industry.
12. If you elect to use a credit repair firm, read the information provided by the FTC about finding a legitimate credit counselor and be aware of suspicious claims and requests. The FTC gives warning signs and suggests that you avoid companies that:

• Ask for payment in advance. It is illegal.
• Don’t explain your legal rights and what you can do to fix your own credit for free.
• Tell you not to contact the credit bureaus directly.
• Tell you to dispute everything in your credit reports
• Advise you to create a new credit identity by applying for an employer identification number. It is illegal.

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