Credit Repair: Steps to Fix a Poor Credit Score

If you’ve made some slip ups it’s not too late to take action and rebuild your credit score. Start by getting a copy of your credit report and reviewing it closely. If you have a low credit score, it’s likely you’ve made one of the common credit mistakes – late payments, derogatory marks or too many inquiries – all things that hinder your score. Here’s how you can fix those common mistakes:

  • Late Payments: start making payments ASAP. Your payment history makes up about 35% of your credit score, so this is one of the most important things you can do to improve it. The longer you wait, the more damage you’ll incur on your credit score. Late payments will usually be removed from your credit report after seven years.
  • Too many hard inquiries: hard inquiries stay on your credit report for 24 months, and your credit score will usually return to its pre-inquiry level within about six months. Be patient and do not apply for more credit unless you really need it and know you can make on-time payments.
  • Foreclosure and repossession: A repossession or foreclosure will stay on your credit report for seven years. Focus on adding positive items to your credit report by making on-time payments, paying down debt and building better money habits to bolster your credit score.
  • Tax lien: if you haven’t paid your taxes, the government can put a lien on your property, which will show up on your credit report. Pay your tax debt as soon as you can because unpaid tax liens can stay on your credit report indefinitely, and paid tax liens stay for seven years from the date of payment. Once you’ve paid the taxes, you may be able to request a “withdrawal” which would eliminate the notice of lien from your credit report. A tax lien has serious impact on your credit report; however, not all liens will appear on your credit report. The major credit reporting bureaus recently decided they will include only liens which meet certain identification and verification standards.
  • Bankruptcy: recovering from bankruptcy is challenging because it stays on your record for a long time, and may make it hard to secure credit. There are generally two types of personal bankruptcy: Chapter 7, which stays on your report for 10 years and Chapter 13 which stays on your report for seven years. Try getting a secured card so you can start rebuilding your credit file after bankruptcy but be sure to choose a secured card that reports payment activity to credit bureaus because not all of them do.
  • Errors on your credit report: if you discover an error on your credit report, follow the steps to dispute the error. All three major credit bureaus accept disputes from consumers online, over the phone or by mail.

Strong credit health can be empowering and help you achieve the financial goals you’ve set – from getting a low-interest personal loan to consolidate your credit card debt to buying your first home. Achieving good credit health begins with knowing your credit score and where you land on the credit score spectrum, understanding what’s in your credit report, and learning what actions you can take to maintain or strengthen your credit health. Check your credit score regularly and review your credit report annually to take better control of your finances and reach your full credit potential.