Building Credit | Part Four: Credit Restoration
Updated: Apr 30
Welcome to the final installment of our four-part blog series on building credit. If you haven't read the previous posts, be sure to explore the first three installments of this series:
Today's post focuses on credit restoration, including strategies and links to various additional resources. If you want to improve your poor credit but are unsure of where to start, this post is for you. The task of repairing damaged credit may seem daunting, but it is important to get started right away. Following the guidelines below will help get you on your feet and heading in the right financial direction.
Get copies of your full credit reports.
Before making a game plan, obtain a copy of your credit report from each of the three credit bureaus:
You can get these reports for free once every year at www.annualcreditreport.com. Your credit score is not reflected on your credit reports, but they will provide you with a detailed assessment of your current situation. It is also important to check these reports for accuracy. Make sure that the following information on your credit report is correct:
Your Social Security number
The spelling of your name
Your credit history including credit cards, outstanding debts, and major purchases
If you find an error on one of your credit reports, make a copy of the report, highlight the error, and gather the information necessary to correct the faulty information, such as bank account statements. Write a letter to the credit reporting agency, including the following information:
A description of the mistake
A copy of the highlighted report
Documentation to prove and correct the error
You may be able to submit a credit report dispute online, but it’s a good idea to send the letter and accompanying documents by certified mail. Be sure to keep copies for your own records.
Credit reporting agencies are required to respond to letters of dispute within 30 days of receiving them. The Federal Trade Commission provides more information on this topic: www.ftc.gov
Credit Bureau Contact Information:
Check your credit score.
Free credit score tracking apps can give you an idea of your credit standing:
www.mint.com updates your Equifax credit score once per month.
www.creditkarma.com reports credit scores from Equifax as well as Transunion. These are updated weekly.
www.creditsesame.com updates your Transunion credit score once per month.
www.nerdwallet.com updates your Transunion credit score weekly.
Make timely payments.
Paying your bills on time are the number one factor in determining your credit score. If you are behind on any bills, catch up as soon as possible. Moving forward, be sure to pay all bills on time. One option to help ensure timely payments is to set up auto-payments. Linking your bills to money management apps such as www.mint.com or www.nerdwallet.com allows you to set up reminders for when bills are coming due. However, paying bills as soon as you receive them is the easiest way to ensure that all of your bills are paid on time.
Pay down your credit card debt.
If you have outstanding credit card balances, prioritize paying these debts in monthly installments. Moving forward, make sure to stay well under your credit limit when charging items or services to a card. After paying your credit cards down, don’t cancel them; having a larger total amount of available credit will help increase your credit score.
Don’t apply for new credit.
Resist the temptation to apply for new credit cards or loans. Each time you apply for a line of credit, the application is listed as a “hard inquiry” on your credit report. These can negatively impact your credit score if you have too many within two years.
Consider a Debt Management Plan (DMP).
If you are looking to consolidate multiple debts, a debt management plan (DMP) may be right for you. Many non-profit organizations provide DMP services. A certified financial counselor will guide you through the process of entering into an agreement with your creditors, after which you will make one lump sum each month to the nonprofit agency, which will then pass the payment directly to your creditors.
Benefits of DMPs can include faster debt repayment, reduced or waived finance charges or fees, and fewer collections calls. Having a set lower monthly payment can lessen the strain of your budget, enabling you to pay off your debt while also building your savings and planning for future purchases such as a home or car.
Note that debt management plans are not the same as debt settlement offers. Debt settlement companies are for-profit entities that charge a fee for their services. The Federal Trade Commission and Consumer Financial Protection Bureau have cautioned consumers against engaging the services of for-profit debt settlement companies.
Seeking guidance on rebuilding your credit, debt management, or other financial matters? Many resources are available to help you address your financial needs.
The ASPIRE Clinic in Athens, GA provides a number of services for individuals, couples, and families in the Athens, GA area. The clinic is a research and training facility affiliated with the College of Family & Consumer Sciences and the Law School at the University of Georgia. Student service providers are overseen by licensed, qualified professionals as they work with each client to find solutions to various financial problems and improve clients’ overall life satisfaction. In addition to low-cost therapy services, the ASPRE clinic provides nutrition education, legal advice, and financial counseling at no cost. Some of the financial assistance services available through the ASPIRE Clinic include:
Budgeting, saving, and tax planning
Managing debt or student loans
Purchasing a home or car
Checking or correcting your credit report
Improving your credit score
Developing money management skills
General education on investing*
*The ASPIRE clinic does not provide guidance on filing for bankruptcy or specific investment advice.
National Foundation for Credit Counseling
The National Foundation for Credit Counseling (NFCC) is the largest and longest-serving nonprofit financial counseling organization in the United States. The NFCC delivers programs and services through a national network of nonprofit member agencies. Each agency is staffed by NFCC Certified Financial Counselors. Services provided include:
Federal Trade Commission
The Federal Trade Commission offers a plethora of consumer information about the following topics:
Be sure to explore the many resources available from the FTC to help you choose a credit counselor, pay down credit card debt, repair poor credit, dispute credit report errors, acquire a loan, and more.
Georgia Department of Law: Consumer Protection Division
The Consumer Protection Division of the Georgia Department of Law provides online information to help consumers make informed decisions regarding car and home ownership, establishing or repairing credit, dealing with debt, managing money, and more. In addition to the numerous articles regarding debt, credit, loans, banking, budgeting, saving, and investing, their website also provides a submission form for consumers to suggest specific topics for the site to address in the future.
Phone: (404) 651-8600
2 Martin Luther King, Jr. Drive SE, Suite 356
Atlanta, GA 30334
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