If you’re looking to improve your less than perfect credit score (and kudos to you for taking a step in the right direction), we know that it can be hard to figure out where to begin. Like, really hard.
However, as with all great projects, your first step should be to get organized. If you’re a list person (and I am), getting organized can be as simple as starting an Excel spreadsheet or keeping a pad of paper handy anytime one of those “Eureka!” moments come to you. But it can also mean getting your resources in order one document at a time as you take the steps towards repairing your credit score.
So, as you begin to rebuild your credit, here are three tips that will help you get organized for what’s likely to be a long but hopefully worthwhile journey back from the brink of bad credit.
1. Get a copy of your credit report
You might be saying to yourself, ‘Wait, I already did this… That’s how I figured out my credit was bad in the first place!’ However, when we say ‘credit report‘ we mean the document that includes more than just your score. Your credit report is basically the blueprint for what is causing your poor credit score, and includes the good, bad and the ugly in regards to your credit history.
Once you purchase your credit report - which generally include a credit monitoring service that starts under $20 a month – start combing through it to see if there are any strange or false statements on your report. Identifying and disputing false negative statements on your credit report are the first actions you should take as you seek to improve your credit score.
2. Create an Excel or Google Doc
As you start to work through the outstanding and false claims on your credit report, the next thing you should do to get organized is create an Excel or Google document to track your progress. Identify which claims need to be addressed and how you plan on addressing them. Include dates of letters sent (Learn how to write a dispute letter here), who you contacted and how many disputes you sent to credit companies or collections agencies. This is the best way to stay organized and updated on who you’ve contacted, and exactly when the dispute took place.
3. Put forth a credit building plan
The last part of getting organized is, of course, creating a plan. Obviously, this is a challenge. However, there is one thing in particular you can do (aside from successfully disputing your erroneous statements) to improve your credit score right off the bat: Apply for a new credit card.
Seriously! One surefire way to improve your credit score is to lower your credit utilization ratio. Ideally, you want your credit debt to remain below 30% of your total credit limit. So, if you have a $1,000 credit limit, you want to report a debt of less than $300. If you add a second credit card in which you make small purchases and pay back in full each month, you’re improving your total overall credit utilization. Plus, you’re improving your credit history and showing credit bureaus that at least one more creditor is willing to lend to you.
If you’re having trouble getting approved for a credit card, consider a secured credit card. These credit cards require an upfront security deposit which, we admit, might not be realistic for every current budget. However, the amount of money you can save on future interest fees go far beyond what you’re likely to put away up front with your security deposit, and the money is still yours; it’s just put away to guarantee your credit line. Secured credit cards are useful since they report to the three major credit bureaus (TransUnion, Experian and Equifax), and some offer credit line extensions that go beyond your secured deposit.
However, if you think you’re more likely to be approved for a credit card, do your best to sign up for a credit card with a 0% intro period on balance transfers. This way, you can transfer the credit debt you’re paying on your current credit card and apply it to your new card’s intro period. Spend anywhere from 6 to 18 months paying back your credit debt (and lowering your credit utilization) interest free.
From there, your plan should include responsible spending and budgeting as you rebuild and reestablish your credit. Use your credit card sparingly if that’s what it takes, and remember to pay your balance back in full each month to avoid snowballing interest fees. Monitor your credit with one of the aforementioned credit report services, and watch as you climb out of bad credit and back into the good graces of lenders.
