

Building a Better Credit Report - Part 3


What Can I Do To Repair and Increase My Credit Score?

Time, patience, and preparing a plan are essential to repairing credit scores. Many consumers have followed the rules, paid their bills on time, and were rewarded with a high credit score. Then, an unexpected event might occur such as illness, loss of employment, or a difficult divorce, and their credit score very quickly plummets, causing personal devastation and financial difficulties. Repairing a credit score will take time, but there are steps that can help you reach your credit score goal.

Three Important Steps to Take to Repair and Increase Credit Scores

The first step is to review your credit report to ensure the information is accurate. Compare your billing statements to your credit report to confirm that the balances listed are correct. Specifically check your credit report for reported late payments. If you find incorrect information, it is important to contact the reporting agency and the credit bureau(s).

Establishing a system to bring accounts current and pay your bills on time is the second step. Many financial institutions offer an online bill payment option. UECU offers a free Bill Pay service that allows members to set up recurring payments to be automatically withdrawn from their checking account. You can also set up automatic transfer of funds to pay for ongoing bills like credit cards or utilities directly from your financial institution.

The third step is to reduce the amount of debt you owe and stop using your credit cards. Make a list of all the outstanding accounts, the current balance, and the interest rate you are paying on each account. Devise a plan to apply extra funds to your accounts that are charging you with the highest interest rates. Remember you must always pay at least the minimum payment on ALL of your accounts. A consolidation loan can make it easier and faster to pay off all of the debt. Financial institutions that provide a consolidation loan will often directly pay your creditors in full, leaving you with just one account to manage.  

Best practices include: limiting the number and amount of debt and inquiries; create availability - a gap between balances and credit limits; move revolving balances to installment loans and pay in full or remove collection accounts (such as medical collections).

Beware of fraudulent schemes that promise a quick fix to rebuild a credit score. The Federal Trade Commission and Federal Deposit Insurance Corporation are free, valuable consumer resources. Utilities Employees Credit Union offers a free financial consultation to assist you with rebuilding your credit score.