We’ve all had our financial hiccups from time to time. Even our credit reports sometimes take hits. Luckily, there are credit repair processes out there that are 100% free.
Look, I’ve been there – my shining near-800 score was once a miserable 500-ish turd that no bank would touch. I seriously couldn’t borrow a nickel with $5 in collateral. What’s more, I didn’t pay some shady company thousands of dollars to perform its grey-area voodoo on my credit report. No, I did it the old-fashioned way and got myself up 200 points within a year.
Here’s how I performed my own credit repair 100% free.
What is a Good Credit Score?
This is a hard question to answer because evert scoring model and every bank has different opinions on what a good credit score really is. But consensus says a good credit score is in the 700 to 800 range. If you go above an 800 credit score, you are in the excellent range, 640 to 700 is the OK range, and anything below 640 is bad to fair.
Again, each bank and scoring model will judge these scores differently, and the numbers will vary slightly.
How do I Start My Credit Repair?
Credit repair isn’t taking some magical wand and waving it around until your score mystically increases. Nor is it shelling out money you likely don’t have to some shady credit repair company. Self credit repair takes diligence, commitment, attention to detail, and a little luck. Here are a few tips to help to do your own free credit repair.
Get All the Free Credit Reports
There are zillions of sites that offer free credit reports and free credit scores, but some of my favorites include Credit Karma, Credit Sesame, and Credit.com. All three will give you your credit reports and credit scores from a few of the three big credit bureaus, Equifax, Experian, and Transunion. You read that right, your score will vary between the three models.
With these scores in hand, put them all together and find the median score — the middle score — and that is a safe bet as to where a bank will score you.
Pay Off Old Debts
If you fall in that bad to fair range and want to improve, use these free credit report companies to dig up what blemishes your credit report has. Got an unpaid utility bill from an apartment five years ago? Forgot about an old credit card that had a 25-cent balance? You’ll want to reach out to these companies and see how you can fix the situation.
Remember, these delinquent accounts are likely now with collections companies that bought them for pennies on the dollar, so you may be in a position to negotiate a payoff and ask to have the account removed instead of zeroed out. See what the collection company can do for you.
Once you get agreeable terms, immediately pay off that balance. If you were not able to negotiate getting the account removed from your report, you’ll likely see a temporary decrease in credit score as that collection account goes from ancient to more current, but the zero balance will push you higher than before in just a few months.
Dispute Unrecognized Debts
Also, if you see anything that you don’t recognize, dispute it. Each Credit bureau has its own dispute process, but they are happy to go through it with you. If the creditor lacks the paperwork to prove that you’re the debtor, then it must remove the account from your report. This is a great way to boost your score quickly, but it doesn’t work for everyone.
Don’t be afraid to dispute something you are simply uncertain about. There is no crime in disputing an account only to learn you legitimately owe the money. And any legit creditor will have the documents to back this up.
Get Your Credit Card Balances Under 30%
A key to good credit is using it wisely. You need to show credit use to have a credit score, but too much use can drag your credit score down. The rule here is to remain between 10 and 30% credit usage: your credit card balances relative to your total available credit.
This does not mean you need to charge a little on every card and be stuck making countless minimum payments. Instead, spread that 10 to 30% over one or two cards and pay them down over time. But always keep a little bit of a balance, as this revolving credit is what shows you’re responsible. Yes, you’ll pay interest on this small amount, but the payoff, in the end, is well worth the few bucks in interest.
If you have multiple credit cards with huge balances, you need to work on a repayment plan. You can try the avalanche or snowball debt-repayment processes to cut these balances down quickly. If you’re too far gone but still have a score that’s good enough to get a loan, you can take out a debt-consolidation loan and pay them all off. This is what I did recently and cut my average interest rate from 17% to 5.5%. Plus, my monthly payment is half of what it was, and the closed-term loan looks better on my credit than high balances on revolving accounts
Get Secured Credit Cards
If you have damaged credit and cannot get a standard credit card, you may have to opt for a secured credit card. These are cards that use a refundable cash deposit as your credit limit. So, if your card has a $300 limit, you likely had to send the card issuer a $300 deposit in case you defaulted on your payments.
Use this secured credit card the same way you would a standard one to start the credit-repair process increase. Then, once your score raises to a point where you can get an unsecured card, cancel the secured one, get your deposit back, and continue your credit-repair process using this standard card.
The Art of Patience
Credit repair is a marathon, not a sprint, so it may take months to start seeing the results. The key is to stick with it until you’re seeing your score jump to a point that you’re comfortable. From there, it is all about maintaining, which may be the hardest part.
Also, don’t get discouraged if you suddenly see a 75-point drop after working so hard. Credit scores are finicky and just because one report says you dropped 75 points doesn’t mean you actually dropped that many points. It could be a temporary account hiccup or just a miscalculation.