If you’ve made some credit mistakes in your life, you’re not alone; unfortunately, working with your money and credit score is something that must be learned over time. But don’t worry — a poor credit score doesn’t mean that you’re doomed. In fact, it can be a great real-life teachable moment to help you in the future. Here are some of the best ways to get started cleaning up your credit score if you feel like you’re sinking and not swimming.
Before you panic, you need to check your credit score first and foremost. How can you know what needs to be fixed if you aren’t even sure what’s broken? You can find a free credit score on any number of websites to help you figure out where you stand. By checking your score, you can see more than just your number; you can also view things like:
- Outstanding debts to creditors, even very old ones
- Your total credit history
- Checks into your credit (verified or unverified)
Remember the numbers: Anything between 300 and 580 is considered a poor credit score, 580-670 is fair, and anything above 670 is considered good. An 800 credit score is considered exceptional, and 850 is a perfect score.
This is always the most difficult part of being in debt, isn’t it? When you’re scrimping and pinching to make ends meet, how can you throw extra money at your creditors? It’s understandably very stressful and, when you’re getting telephone calls and notices in the mail, downright frightening. However, remember that you’re not the first or the last person to be in this situation.
Contact your creditors and ask to speak to a representative. When you’re connected to a human (not a robot), explain your situation. Be honest: You are experiencing financial hardship and you are unable to pay the full amount, but can give them a monthly payment of X dollars (whatever you can afford). You might be surprised at their willingness to work with you, especially when you speak to them openly and honestly — person to person. A lot of the time, creditors will be satisfied with a smaller monthly payment plan, but you need to communicate with them first. Don’t take it on faith alone that your smaller payment is accepted by the Powers That Be.
Remember how your credit score lists checks into your credit? Well, as you dig through your history, you might notice that some of these checks are not verified by you. Thanks to the Fair Credit Reporting Act (FCRA), THIS COULD POTENTIALLY BE ILLEGAL. It is absolutely your right to call out companies that do not have strict written consent from you that have been pulling your credit. If you happen to notice some weird credit pulls — even if they’re from several years ago — that are damaging your credit, then this is where you need to take action.
Compose a letter of dispute explaining that you did not verify these credit pulls and that the FCRA forbids them. It needs to be explicitly stated that you require an investigation into these checks, and that they are going against the federal government in pulling your credit without your permission. These letters can be pure magic; within 30 days, you will start seeing them melt off of your credit score.
Note that this process doesn’t happen overnight; it will likely take several months, even years, but it’s worth the trouble if you sleep better at night and are better set up in the future. Pulling yourself out of debt is scary and stressful — but in the future, when you’re able to look back and see how far you’ve come, you can see how much stronger and smarter you’ve become.