9 Steps to Repair, Improve, and Protect Your Credit

The following steps will help anyone recover from past financial mistakes. These steps will help you rebuild, protect your credit, and obtain the credit scores needed to qualify for credit cards, loans, and/or mortgages (subject to income or other qualifications). If you have credit issues you must not only clean up derogatory obligations on your credit report but also establish new credit. Your scores determine your ability to qualify for that new car, credit card(s), vacation, mortgage, or even a job. Credit impacts almost every aspect of our lives. Many employers now require a credit check and past credit issues such as: bankruptcies, foreclosures, or judgments may disqualify you for a better or new job.

The following are steps to rebuild your credit:

Step One – Request a free copy of your credit report from all of the 3 main credit agencies (Transunion, Experian, or Equifax). Your reports can be requested online from any of the above mentioned credit agencies or through annualcreditreport.com. You are legally entitled to one free credit report yearly from each credit agency.

Step Two – Thoroughly review the report(s) for any errors or discrepancies. You can request the credit bureau correct any errors or dispute any derogatory accounts. You can dispute any inaccurate accounts. If the creditor who put the derogatory credit on your credit report cannot provide evidence that you owe the debt, it should be removed from your report.

Step Three – Bring all accounts current. If you have past due accounts focus on bringing them current first. Usually you can bring delinquent student loans current by negotiating a payment arrangement with the creditor. Then after 6 months of on time payments the creditor will likely report the account as current. If the creditor allows, change the payments to an automatic deduction. That will ensure your future payments are paid on time.

Step Four – Rebuilding your credit. Secure credit cards are offered by large banks online, local banks, and /or credit unions. A secure credit card usually requires a $300 to $500 deposit to open an account. This type of credit card will report payment activity to the credit bureaus just like a standard credit card. A secure credit card is a great way to obtain new credit. The last thing you want to do is apply at numerous lending institutions and pile up inquiries (which will lower your credit scores). You may need a co-signer if your credit scores are below 500.

Step Five – When rebuilding your credit, time will be your best friend. After 6 months of on time payments with a secure card, ask the lender to upgrade your credit card to a standard card. Also ask for the limit to be increased. This will give you more room to keep your balance under 30% of the available limit. Department store cards are a good place to start because they’re usually easier to qualify for. Remember to keep your card balances under 30% of the available limit to maximize your scores.

Step Six – Limit your inquiries. When shopping for a new credit card, installment, or auto loan, research the requirements first. If you do not qualify for the loan, go to another lending institution. The last thing you want to do is lose points from excessive inquiries.

Step Seven – Avoid closing credit cards. Usually the credit bureau does not differentiate between a card closed by the consumer or the creditor. Closing accounts can affect your score by lessening the amount of long-term established credit.

Step Eight – If you are unable to open a secure card, look into becoming an authorized user with a relative. They may qualify for the loan or credit card and add your name as an authorized user. You can use the card, make the payments, and have the payments recorded on your credit report.

Step Nine – Contact the credit bureaus to put a freeze on your accounts. This will prevent new accounts from being opened unless you contact the bureaus first. Identity theft protection services can be purchased which will monitor your credit activity and alert you of any potential fraud. Identity theft services can usually be purchased for less than $25 per month.

Credit Repair Business Plan

Here’s the executive summary of a Credit Repair Business Plan:

  • a description of your company, including your products and/or services
  • your mission statement
  • your business’s management
  • the market and your customer
  • marketing and sales
  • your competition
  • your business’s operations
  • financial projections and plans

For someone looking for a credit repair business plan, a simple description might be “Ace Credit restoration provides credit restoration services to help consumers attain good credit and therefore have more attractive financing options. The company provides credit repair on a fee-for-service model charging $800 to $2000 per client and reaches new clients via relationships by credit-dependent professionals (real estate, car dealers, etc.), financial professionals (tax, insurance, financal planners), consumer direct marketing (internet, radio, tv, postcards), and past-client referral cultivation.

Any business plan should then talk about management, which refers to your experience. If you have experience managing a team, attention to detail, and/or financial experience, this is relevant and should be included.

When writing about your client, the consumer, you’ll find there are about 70 to 80 million americans with bad credit, many millions of whom will need to finance a home or car or other purchase and will therefore be interested in purchasing credit repair services. While some people do attempt credit repair on their own, credit is becoming increasingly complex and important. Fewer people succeed or event attempt it, and like dealing with plumbing or auto repairs, most are willing to pay a professional to get it done right.

Next, you should include a specific marketing breakdown. We have found that at first, referral relationships are a great place to start. By offering “credit repair seminars” or “lunch and learn” events to local real estate agents or car dealers, you can quickly position yourself as an expert, develop referral sources, and help them sell more homes or cars. As your business grows, you’ll want to branch out into mass media, internet marketing to increase your visibility and scale up your operations.

The next section generally will cover competition, which of course varies by market. Currently, the credit repair business is still open and largely driven on referrals at time of need, meaning people often get their credit restored when preparing to buy a home or car, or after being declined for some type of financing (i.e. a credit card at better terms than they have presently). Longer term, the internet is a massive source of business that still has substantial opportunity. One still largely untapped area needing someone to execute their credit repair business plan is in the area of social marketing (i.e. Facebook) and joint ventures with point-of-need media i.e. a referral relationship with leading real estate websites, car dealer websites, etc. who depend on attractive financing.

Next, your plan should cover operations. You can run a credit repair home based business, or you can use office space. One under-used idea is renting a desk inside a busy real estate office. This can provide more than just a professional meeting place, but the proximity of agents who depend on their clients having good financing will virtually guarantee some clients are delivered to you. This can also help embed your credit repair business into the local ecosystem of potential referring businesses such as mortgage, insurance, and financial professionals. Most real estate offices would be open to renting a desk or office within or nearby the facility. Another option for your credit repair business plan is to run a home based credit repair business, but have a set schedule at local real estate offices or car dealers to review any new files and answer questions the agents or dealers might have.

Financial projections and plans in your credit repair business plan should address startup costs and revenue, and possibly even exit such as sale of the company. Since there are systems that provide more than just software, but complete turn-key systems (similar to a franchise) including training to make you the expert, unlimited paralegal support, annual conferences, marketing support, legal support, and much more you should investigate your options.

Obviously success varies by talent, work, resources and abilities with any business opportunity. That said, we know of affiliates who have taken their credit repair business plan and executed on that plan, grossing over $100,000 per month. If you like the idea of being your own boss and earning an executive level income, we encourage you to take look at your business plan as just the first step an an exciting new venture.

When to Seek Credit Repair Companies

Credit repair refers to the process of reviewing your credit reports from each of the three main credit bureaus to rectify any possible mistakes and discrepancies that often appear in these files.

To quote a relevant study by the United States Public Interest Research Group (US PIRG): “79 percent of all credit reports contain a mistake, error, or discrepancy of some kind.” Additionally, 25 percent of credit reports contain a major error that could result in the denial of new credit.

With such a high prevalence of errors, and one in four chances that the error could cause you to be denied a new credit line, it is important that you take the necessary steps to review your reports on a regular basis and work to correct your mistakes to maximize your credit scores and borrowing potential.

That said, you should bear in mind that repairing your credit is a time-consuming activity that will also require a high level of attention to detail. So, you will probably need to hire a third party to act as your proxy and attempt to identify and remove any negative information from your credit report. The parties that offer these services are known as credit repair companies or organizations, and their contractual, billing, and advertising activities are controlled by the Credit Repair Organizations Act (CROA).

When to consider a credit repair company

There are many ads of companies claiming that they can fix your bad credit. And while many of them are a scam, there are some that have been in the business for a while and know the rules surrounding the process. These companies know how to identify errors and navigate the rules to help raise your score, but there’s certainly no magical formula that works in every case.

That said, there are certain instances when credit repair companies can be of assistance, like:

1. When you have legitimate errors on your credit report

The primary function of any credit repair company is to remove errors from a faulty credit report.

2. When you have errors that can’t be verified

If you have a negative statement on your credit report that cannot be verified, like when the lender concerned was bought out or went out of business, then it should be removed.

3. If the lender is willing to negotiate and work with a credit repair agency

Strict lenders don’t like to work with credit repair companies, but some are willing to listen and negotiate so your score can be raised.

Final note

When it comes to fixing your credit, clients typically fall into one of three groups: those trying to build credit for the first time, those looking to maintain their current credit score, and those looking to fix bad credit. Regardless of your goal, you need a solid plan for reaching it, and finding the right company can provide you with the necessary expertise to achieve your credit goals.

Why Tax Season Is the Time to Repair Your Credit

Why is tax season the best time to repair credit? As important as credit repair is, this process repeatedly slips to the bottom of many people’s to-do lists. They make excuses, telling themselves that it’s not quite the right time to get around to addressing credit issues. If this situation sounds familiar, there’s good news. Tax season is a great time to take strides toward resolving your credit issues and improving your FICO score. Take a look at why you should seize this opportunity to improve your financial future.

Financial Issues Are Already On Your Mind

Whether you’re doing your taxes yourself, hiring a tax professional or using tax preparation software, the tax filing process requires you to evaluate your overall financial picture. Many people with credit issues find that this first step toward credit repair can be the most difficult part of the process. Because you’re already taking stock of items such as your earnings, loan interest, charitable donations and expenses when you do your taxes, this is the perfect time to continue that process and delve deeper into your financial picture. While you’re researching and calculating, add up your total debt, take stock of your debt payment history, order copies of your credit reports and review them. Create an organization system for all of this information so you’ll have an easier time keeping track of your progress as you work toward improving your credit. Daunted by the idea of tackling it yourself? Gathering all your records can also be the first step you take before turning to a professional credit repair company that can put you on a better financial path.

You Can Get a Head Start at Paying Down Debt

If things go well, tax season means you should receive a tax refund. While it may be tempting to spend that money on a new purchase, a few nice dinners or a vacation, it’s a better idea to put the cash toward improving your credit score. If unpaid debt is one of the issues that has contributed to your less than ideal credit score, putting your tax refund toward one of those outstanding balances can be a significant step in the right direction. Don’t fall into the trap of getting discouraged if your tax refund is only a small portion of your total debt. Every little bit helps and puts you closer to your financial goal of having less – or no – debt weighing you down. Using your tax refund to pay down debt can also inspire you to use future lump payments to cut back on debt. This small effort could be the first of many tax refunds and bonuses that go toward chipping away at your debt and making a big impact over the long term.

You’ll Eliminate a Common Barrier with an Emergency Fund

Maybe you’ve tried to repair your credit in the past, but you were thrown off track by an unexpected car repair bill or health expense. One of the main reasons people continue to damage their credit score is because they aren’t prepared to handle emergencies like these. If this situation sounds familiar, you can use your tax refund to create an emergency fund. This will give you more security and flexibility to improve your FICO score without your having to worry about getting sidetracked by unexpected expenses and financial setbacks.

You Can Invest in Professional Credit Repair

If you’re not sure where to start when it comes to fixing your credit – or if you feel that you simply don’t have the time to research credit repair strategies – consider using your refund to invest in credit repair services. Credit repair professionals offer services that include disputing erroneous items appearing in your credit history, providing personalized advice for your particular situation, closely tracking your progress and ensuring that you stay on the right track even after you’ve achieved a good credit score. If you have a large enough tax refund, you may have enough money to invest in affordable professional credit repair and still have money left over to put toward other uses. Even if you feel confident in your ability to repair your credit on your own, using a credit repair company gives you access to resources that can significantly speed up the process.

Now is Always the Best Time

Perhaps the best reason to address your credit during tax season is that putting off this important financial step can have several negative consequences. For one thing, it takes time to fix poor credit, so when you put off addressing the problem, you’re delaying that positive outcome. Regardless of what your finish line goals are – purchasing a home or freeing yourself of bad debt – you’ll reach that finish line sooner if you take the first step as soon as possible. There’s another major problem with procrastinating when it comes to fixing your credit. Bad credit costs you money. Individuals with poor credit are charged more in fees, interest rates and deposits. The longer you wait to repair your credit, the more unnecessary expenses you’ll incur. Hold on to your hard-earned cash by starting to build a better credit picture today and paying less in unnecessary charges and fees. Tax season can be a pain for many people, but it can also provide a timely opportunity to evaluate and improve your credit situation. No matter what stage of the tax-filing process you’re in, take the time to carry out these extra steps so you can embark on a rewarding journey toward better credit and a better financial life.