Fixing your Credit Score

Do you have a Costanza wallet?

Most people don't realize how easy it is to raise your bad credit score by 100 points. Most assume that once your score has been damaged, that it takes years to fix. This is not the case. In my youth (younger youth), I was reckless. I made decent money, which allowed me (so I thought) to be careless with my finances. I lived paycheck to paycheck, overdraft fees were common, and I needlessly missed payments. I hit bottom in 2008 when I needed to buy a new Guitar (I wasn't any good because of the Guitar I had). Denied. I checked my scores, and found them in the low 500s. There had to be a way to fix this, so I did some research online. Here is what I found, and the steps I followed to fix my scores.

Phase 1 - Dispute everything

This is the easiest, as well as the most effective step. As you know, there are 3 credit bureaus. Experian, Transunion, and Equifax. They each have their own websites, and they each should give you one free report every year. Get your reports for each bureau, and find all your late payments and collections. Now, dispute every one of them. You can do this right on each bureau's website. It matters not if you were at fault. I know what you're thinking. It's lying, yes (don't judge me). Try not to think of it as lying, but as a way to fight back against the big bad banks without skipping showers and sleeping in a sleeping bag on Wall Street.

You see, these lenders have only 30 days to respond to your dispute, or else it gets removed from your report. Most lenders don't care enough to respond to every dispute, so there's a good chance you can get at least half of your credit dings removed. I did this, and within 2-3 months, my score was up 130 points.

Phase 2 - Pay down your balances

Now things get more difficult. You must pay down your balances. Any revolving credit account with a balance over 30% of your credit limit is hurting you. Use the Debt-Snowball Method and pay off the smallest balances first. This will free up more money to pay off the larger balances faster. Call the credit card companies and ask for better rates (once again, you'll be surprised what asking can get you). Obviously, paying down your debt isn't just good for your credit score, but also a fiscally sound practice in general.

Phase 3 - Need, not want

Lastly, once you have your balances paid down, you can close out a few unnecessary accounts. Don't go overboard and close out every account, since this can work against you. Don't open new accounts unless you absolutely need to, and not because you want a new Guitar. Keep your credit clean and simple. Take the cards out of your wallets or purses. You don't need the Constanza Wallet. In my wallet, I have one credit card, one debit, health insurance card, and my company credit card. That's it. Keep it simple.

No relapses

Keep your credit clean is a lot like an Alcoholic keeping their liver clean. It's tough to stay clean, and embarrassing when you can't. It will be tempting to relapse once you have fixed your credit, because the justification fairy will visit and make you feel like you have “earned” a little credit mischief. This is why I recommend removing the cards from your wallets and purses, and taking the impulse factor out of the equation. Using these methods I was able to raise my score almost 200 points in about a year.  Keeping a good credit score can save you thousands of dollars over a lifetime, so don't procrastinate, start now!

Good luck savers, we're all counting on you.