Having bad credit is a something that we associate with a lot of shame in our society. And for some reason, nobody wants to talk about it. Like you should be ashamed for what happened and just suffer in silence.
But this thinking has only created bigger issues, like how no one really knows how to fix their credit. We have all heard things, but more about stuff that hurts our credit, and a lot of that is false information coming from collections agencies trying to make their money.
Keep in mind, I am not a financial expert, and I was not paid by Credit Karma to write this. Instead, I had credit issues at one point in my life, due to some rough patches in my life, and I used Credit Karma to get myself back up to date and on my feet. It wasn’t easy and it took a while, but I did it. Because of that, I wanted to share my experiences to hopefully help some of you!
The app or website or provider you use for this isn’t as important as inspiring yourself to start working on it! My favorite thing about Credit Karma was that it is FREE, and it offers things to help your score, no matter where you are at.
Disputes and false accounts
When you get started with Credit Karma, it shows you where your score is and all of your active, inactive, past due and, collections accounts. No matter where your score is, you need to take a look at all of this stuff. Look for anything that seems strange, or like it shouldn’t be there.
I noticed a strange account on one of my collections, and it turned out to be a case of identity theft! Who would’ve known??
Fortunately, it’s really easy to submit these for dispute. The first thing you will need to do is contact the creditor. You can do this buy selecting the debt in the breakdown and it will show you their contact information. Find out what you need to do for them to submit this as a being incorrect. Then go back to Credit Karma and submit a dispute on it.
It’s as easy as that!
Collections are the scourge of credit. Even just one collection will ruin an otherwise spotless credit score. Lenders will not even give a home loan to someone who has open collections on their account. If you’re not familiar with where a collections account comes from, please refer back to ** credit **.
You’ll notice on the page for each collections account, it shows how much you owe, all the stats of the loan, and it shows the contact information. This is great because it will show you how to get in contact with the people you owe!
When you pay a collections account, it will almost always hurt your score immediately. Don’t panic, this is temporary and it will come up a lot after some time has passed.
“I have collections, how do I get rid of them?”
Well this depends on your situation. Ideally, the absolute best thing that you could do is pay it all, in full, in one lump sum. It will still hit your credit negatively, but this will impact you the least.
But if it were that easy, we probably wouldn’t have collections, now would we?
The next best thing you could do is set up a payment plan. $100 a month for this many months, or what have you. This will drag out the process of the the lump sum method a lot longer, so you will see a longer drop in your credit score. But it will eventually come up.
The last option is to settle. Settling means to pay less than the full amount to get the record removed from your credit. This is the least recommended method to removing collections. That is because FICO sees it as a breach of contract – “You agreed to pay X, instead you only ended up paying Y”.
Settling will most likely affect your score much more negatively than the other two methods.
Secured Credit Cards
A secured credit card is something that is now being offered to people who have low credit scores and are trying to turn it around. It’s basically like a financial institution giving you another chance. They don’t give a whole lot of chances, so make sure you know what you’re doing!
It’s pretty simple the way that they work, it’s a lot like a prepaid debit card, but it counts toward your credit score just like any other credit card would. So you pay, let’s say $300 onto the card upon activation. That becomes your credit limit. It’s no longer your money, it is your chance to show the financial institution that you understand the ins and outs of credit cards and that you can do what is necessary to maintain good standing with them See do’s and dont’s of credit!
The whole process of fixing your credit score with any of these websites or applications is pretty straightforward, and is listed in their programs. I wrote this article to show you how easy it is to do, and inspire you to do it. Because that’s what you really need to fix your credit, motivation and inspiration.
Now it’s time to just sit back and watch your score go up!
For tips on how to keep your credit score increasing, instead of decreasing, check out my article The Do’s and Don’ts of Credit