It’s time for you to get a new car, sign a lease on a new apartment, or get a mortgage for a new home, but there’s one problem: your credit score is atrocious. That means you are in need of credit restoration.
But you likely have many questions. Why is credit repair important? How does credit repair work? Which credit repair company is the best?
The good news is that if you’re here, then it is because you’re ready to take the proactive steps towards repairing your credit. It is important, however, to go into this process carefully to avoid frivolous mistakes.
Below you will find the most common mistakes that people make when trying to repair their credit, and they all stem from simple misunderstandings and assumptions that anyone could be guilty of.
Ignoring your credit altogether (and therefore, not making the effort to repair it).
This should be a given, but this mistake is not a clear one to everyone. One of the most common mistakes that people make is trying to ignore their credit altogether. That is until it comes time to apply for a loan or credit card.
Since your credit score is a reflection of your ability to repay a loan, it is important to keep close tabs on your credit report to ensure that it is always accurate and up to date.
There are instances when you have an unpaid balance, and as a result, it is transferred to a collection agency. The thing is, if you don’t keep an eye on your credit report, you may not even realize that you have an account in collections.
Other mistakes and discrepancies can appear on your credit report as well. In fact, about 34% of Americans have found at least one mistake on their credit report. That means it’s worth it to review your credit report periodically to check for these errors.
Filing a dispute for every single thing on your credit report.
This should go without saying, but you should only dispute items on your credit report when you sincerely believe that they are inaccurate.
While it can seem efficient to simply dispute all items on your credit report, it actually can appear irresponsible to the credit bureaus, who will not take your claim seriously (and they’re the ones you’re trying to appeal to).
This is a tactic that many credit repair companies use to anticipate the best results, but it is important that you take initiative for your credit repair by educating yourself and using best practices.
Closing out your credit card accounts.
It can seem like a good idea to close out all of your credit card accounts once you have paid them off. Perhaps this is to save yourself from running up the balance once again.
However, closing out a credit account can actually hurt your credit score because the score takes different factors into account.
For one, the length of your credit history makes up 15% of your overall credit score. This means that if the account is older and you have paid it off, leaving that on your credit report can be viewed positively by lenders as it is proof that you are capable of repaying your debts.
Furthermore, having a balance that is paid off can help your credit utilization, meaning that you have more credit available for use (which can also help your credit score).
Skipping a credit card payment to make a payment on another credit card.
Accruing more debt to pay off another debt is just as detrimental as it sounds. This will only increase your overall debt and cause you to pay more interest in the long run.
Your payment history is the largest factor that is taken into account in your credit score. This means that making regular on-time payments is a simple way to improve your score. It is best to avoid making these payments using another form of credit, however.
Choosing to file for bankruptcy can seem like a nice, fresh start for your credit, but it is anything but that. Once you file for bankruptcy, your credit score could drop as many as 100 points as a result.
Lenders can see on your credit report that you have filed for bankruptcy, which will make you an unlikely candidate for a loan of any kind. This negative impact will remain on your credit report anywhere from seven to ten years.
It would be best to communicate with your creditors directly and try to set up a plan for repayment before taking the seemingly easy way out.
It can be challenging to know exactly where to start when it comes to credit repair, but the first step is acknowledging its necessity and assessing what needs to be done for your report specifically.
If you have no idea where to start, it could prove beneficial to work with a professional to address the issues on your credit report.
Cool Credit is a hassle-free credit repair service with multiple solutions to restore your credit. Cool Credit can assess potential negative items on your credit report and make a plan to dispute and remove them if they are inaccurate.
Don’t wait — sign up for a free consultation with Cool Credit today.