7 Reasons You May Need Credit Repair

Certain types of credit damage take longer to repair than others. If you have many different types of debt you may need to prioritize which type is causing the most damage and resolve it first.

When it comes to your repairing credit there are two ways to look at the damage, short term damage and long term damage. Short term damage can be repaired by paying down balances, making regular payments for 6 to 12 months, changing your credit mix and disputing inaccurate information. Long term damage requires you to wait seven years or make payments on debt for longer than 12 months before your credit utilization improves.  

If you are frustrated by a low credit score, identifying why your score was damaged in the first place is a great way to start planning how to repair it. 

Credit Damage after Identity or Credit Card Theft

Credit card fraud is one of the most common forms of identity theft. According to the Federal Trade Commission stolen cards account for 33% of identity theft and fraudulent accounts make up 12% of identity related crimes. 

If someone has access to your name, date of birth and social security number, they may be able to open a credit card in your name without your knowledge. If someone steals your credit card, they can charge payments to your account until your card is cancelled. 

What You Should Do:

  • Dispute False Information on Your Credit Report
  • Regularly Monitor Your Credit To Prevent Future Fraud

If you don’t monitor your credit regularly these fraudulent accounts and charges can become delinquent and severely impact your credit. If this happens it will be your responsibility to contact each credit bureau to dispute the charges and have them removed from your report. You may also have to dispute the charges with the credit card companies and might need to take legal action to do so. 

However, having the debt removed from your credit report may not stop the creditor from attempting to collect. 

The Fair Debt Collections Practices Act (FDCPA) which governs debt collection allows collection attempts to continue even after the debt has been removed from a credit report, as long as the debt is valid You may have to defend yourself in court in order to stop a creditor from attempting to collect a fraudulent debt. 

Repair your Credit After a Bankruptcy Discharge

The impact on your credit score after bankruptcy depends on what your score was before you filed. While you can take steps to improve your score right away following your discharge, the bankruptcy itself will remain on your report for at least 7 years. 

The best way to recover from a bankruptcy is to make on-time payments on any new accounts or on accounts that survive the bankruptcy. You should also focus on your debt to income ratio and make a budget that ensures your are living and borrowing within your means.   

A demonstrated history of good debt management and healthy spending habits will go a long way to showing that you have recovered from the bankruptcy.

Credit Repair After Eviction

In order to improve your credit, you will have to find a way to repay your unpaid rent and close the debt. It may be possible to negotiate a lower payment with your former landlord to avoid  going to court. In rare instances, unpaid rent may be charged off. 

If you eventually pay off the debt but were legally evicted your report will show that the debt was paid but the eviction will stay on your record for 7 years. 

Timely payments will make the biggest difference in improving your score and gaining the trust of future landlords.

In order to rent after an eviction you may need to find a landlord that specialized in poor credit. These landlords will often require extra security deposits and will report your monthly payments to the credit bureaus. This means if you are able to pay on time, it can help your score, but if you cannot your score will suffer making it that much harder to rent in the future. 

After A Debt Collection Lawsuit and Settlement

If you have been sued by a credit card, bank, landlord or other debt collection company and lose your case, you will be legally obligated to repay the debt. Both paid and unpaid civil judgments will remain on your credit report for up to seven years from the filing date.

If you win your case, you can dispute the charge with the credit bureaus to have it removed. 

Late Payments on Loans and Credit Card Debt

If your credit score has suffered because of credit card debt, the best way to repair your score is to resolve the debt. You’ll need to pay unpaid balances to bring your account current and then continue to make on time payments moving forward. 

If your credit card debt has led to high credit utilization then repairing your score will involve paying down the balance so that you have a good credit utilization ratio

While 30% or less credit utilization is a good rule of thumb, having 10% or less is even better. However, some experts don’t recommend zeroing your credit usage, and instead allowing a small amount to rollover so that you can demonstrate an ability to pay interest. 

Lenders want to see that you are regularly using your credit and repaying your debt.

Home Foreclosure and Property Repossession

With a foreclosure or repossession after a period of non-payment, the lender will typically seize the asset and resell it to close the debt. Under these circumstances, any equity that the borrower had in the property will be used to pay off late fees to the creditor. For example, if you are 6 months late on your loan payments and the bank forecloses on and sells the property,  the late-payment penalties for those months are added to the total loan amount and will be subtracted from the proceeds of any sale. That reduces your equity.

The foreclosure or repossession will show up as a derogatory mark on your account for 7 years. The impact on your credit score depends on how high your score was beforehand. The higher your score is the farther it can fall.

After a foreclosure, patience and consistency will make the biggest difference. You can’t speed up the removal of the derogatory mark, but you can practice good habits to improve your credit. 

Charge Offs after Months on Non Payment

A charge off occurs when a creditor decides to write off a debt as uncollectible. This usually happens after an extended history of non-payment. Creditors may do this if they cannot sell the debt to a collection company or  it would cost them more to litigate than the debt is worth. 

Charge offs are incredibly damaging to your report. Although it may seem like a “get out of debt free” card, it’s very bad for your credit. It’s best to contact the creditor and negotiate a repayment plan or settlement to avoid having a charge off on your report for up to 7 years. 

Take Your First Steps Toward Credit Repair

Poor credit scores can make it difficult for you to find housing, establish service with utility and phone providers, buy a car and lead to high interest rates on new credit.

Prioritize your debt and follow these steps: 

  1. Dispute fraudulent or inaccurate Information on your credit report
  2. Make a plan to pay down, consolidate or settle your debts
  3. Make regular payments and keep credit utilization low 
  4. Implement good spending and debt management habits

Learn more about good habits that will help you repair your credit by reviewing examples for daily, monthly and yearly strategies.