Have you ever thought of doing Credit Repair yourself?
If you’ve said yes – then you’re not alone.
On average, thousands of Americans every year get shocked and disappointed when they look at their Credit Reports only to uncover discrepancies in their file.
Unsure of what steps to take next, most are left with figuring out on what to do. And, worse yet, some even just leave it be to the point where it hinders their ability to borrow any money. At times, it may be that they are simply trying to purchase a home and due to their credit conditions, they are denied by the banks and cannot qualify for a mortgage.
Whatever the situation, fixing your credit is possible and by the end of this article, I’m going to be sharing with you the 5 principles of Credit Mastery so that you can apply them yourself.
Principle #1: Taking Ownership will help you identify the weak links
The first and most basic step is to obtain a copy of your Credit Report. Once you have it, you need to take your time and analyze every single line item carefully.
Here’s a recommendation that I make to all my clients:
- Make sure that your name is spelled out properly and only one possible name shows up and not a combination of different names
- Verify your address and remove any outdated residential information that is no longer relevant
- Make sure that you take your time and analyze the Public Records, which includes dates, items and account information
- Look through your Credit Report to verify if there are too many inquiries that do not belong there
- When going through individual items one by one, make sure that the account numbers, balances, account status and all the corresponding information is accurately labeled. (You can verify this by checking your statements and invoices)
Once you have followed the steps indicated above – be sure that you have reviewed it one last time to make sure that you haven’t missed anything important or relevant.
Principle #2: Avoid the Binding Arbitration Issue by Following This Step
For a lot of customers, the thought of arbitration is scary. And, the worst part is that when you attempt to pursue the Credit Bureaus in court, they are protected because of a clause that protects them due to how you obtained your credit reports in the first place.
To avoid this issue, it’s important that you obtain your Credit Reports from third parties and sources. You may request it directly with the Bureaus by calling them, however – when possible avoid obtaining them directly online from the major 3 bureaus websites.
A good place to start is to go to Credit Check Total. Their system is fairly accurate and they provide all 3 reports in a clear and concise manner that is easy to understand and follow.
Principle #3: By Creating an Action Plan – you are most likely to Succeed
As basic as that sounds, if you don’t have a plan – you are simply planning to fail.
Due to the sensitivity of the process on fixing credit, the process may take anywhere from 2 to 9 months and beyond.
That is why it’s important to create and document an action plan that you can use as a reference and guide. This plan will not only serve to help you go through the process on a step by step manner but it will also act as a checklist to ensure that whatever approach you are taking is a well thought out strategy.
If you’re looking to clean up your credit and want to increase your scores, a plan is necessary. It does not take a lot to come up with a solid plan. Below is an example of what you can include to help you:
- Summary of negative items
- List of items that you will be disputing including names, addresses, public records, inquiries and individual itemized accounts
- Assessment of current financial condition which includes household income, overall debt, debt to credit ratio as well as any assets that you may have in order to leverage financing
- Timeline that you are giving yourself in terms of achieving the goal
- Worst Case Scenario execution strategy
- Best Case Scenario execution strategy
There are obviously a lot more items that you can add but this should give you the basic picture.
Principle #4: Be Cautious of your Old Accounts to avoid future Challenges
Often, I get asked a lot from my customers if they need to worry about any new negative items showing up on their Credit Reports.
My answer is always simple. I always tell them that if they are maintaining their old accounts and they are in good standing, they have nothing to worry about.
Yes, it’s true that while time to time, clients may face hardships. However, they need to be open and transparent about their current financial condition.
Does fixing your credit now make sense – even if you are not able to pay your bills at the end of the month? At the end of the day, if you get multiple late payments and are attempting to fix your credit, the negative items are most likely going to show up again.
In those unique circumstances, it’s best not to pursue fixing your credit, until you have a stable financial condition to start catching up on payments and in order to maintain the accounts in good standing.
With that said, you still want to maintain low balances as to avoid issues. At times, its possible that you borrow a large chunk due to specific needs. However – attempt to bring those balances low again since your credit ratio is very important when it comes to measuring your FICO score.
Principle #5: Obtain more Leverage by Working on Strengthening your Existing Accounts and Banking Relationships
Leverage is key in finance. If you’re able to borrow more than you need and don’t use it, you’ll be doing yourself a strategic favor.
What do I mean by that?
For instance, say that you are eligible for an unsecured line of credit in the amount of $25,000 and don’t necessarily need it at the moment. You should take that chance and work on establishing that credit account since it’ll add to your credit history.
A key to underwriting decisions is how old certain accounts are and how often have they been used. Most customers don’t know this but using your accounts time to time, even if it be a few dollars, is worth the time and effort.
Here’s the thing:
You can actually apply to increase your existing limits with certain accounts that you already have. The rule of thumb here is to make sure that you’ve had those accounts for at least 6 to 12 months. In most cases, these creditors are willing to work with you – so long as you’ve maintained a good payment history with them.
Fixing your own credit is certainly possible. The key is to make sure that you have a process and that you are able to hold yourself accountable. Make sure that you follow the 5 principles that I’ve shared with you today and that you are able to go through them on a step by step basis.