Over several years you used credit recklessly. You paid bills late. You didn’t keep track of cumulative credit card debts and what it was doing to your credit. Your credit rating is horrible. Forget the car loan or mortgage.
But you can fix your credit, regulators and card specialists say, with a long-term effort.
“There are no quick fixes to clean up your credit,” says Lisa Lake, a Consumer Education Specialist with the Federal Trade Commission (FTC).
“Start being very diligent in paying your bills,” says Bill Hardekopf, the founder of LowCards.com, a credit card advice website.
“If you have a habit of late payments, make a schedule to pay earlier in the month or have your payment due dates changed to fit your payment,” says Greg Mahnken, an analyst with Credit Card Insider.
“If you have unpaid accounts going into collections,” he adds, “verify the debt and make a plan to pay it off and avoid unpaid bills in the future.”
Lake warns companies offering shortcuts to better credit ratings, credit repair services, often scam, a sentiment underscored by a consumer advocate.
“These guys, are constantly coming up with new names for the same old scam,” according to senior director Ed Mierziwinski, with public interest group US PIRG.
Some credit repair companies, the FTC writes in a paper, “may try to collect their own fees from you before they have settled any of your debts—a practice prohibited under the FTC’s Telemarketing Sales Rule (TSR).”
Ted Rossman, an industry analyst with CreditCards.com., says improve one’s credit rating by lowering the credit utilization ratio.
“A credit utilization ratio is a fancy way of saying how much credit you’ve used by how many you have available to you. Try to keep it below 30 percent, but whatever it is you should benefit from bringing it down,” Rossman says.
Reduce high credit card debts “by making an extra payment or two,” he adds. That, Rossman says, improves a credit rating.
Rossman believes non-profit credit card counseling firms can also help. Most advisors recommend these counselors. Rossman likes Money Management International.
Take these additional steps, cards specialists say, to achieve a better rating.
*Get a free copy of your credit report and go over it carefully. Do you recognize all the accounts? Rossman warns “20 percent of all U.S. adults have errors on their credit reports.”
*Mistakes? Then contact the credit bureaus that reported the wrong information. Under law, they must delete it. You don’t need a credit repair company: You can dispute inaccurate items for free.
*Time can correct negative information on a credit report. By paying all bills on time and jettisoning old debt as well as not creating new debt, you will eventually re-establish a good credit rating.
*Consider a secured credit card. They are offered by some banks and credit unions. Credit Karma says some good secured credit cards are:
*Capital One Secured Master Card
*First Progress Platinum Prestige Master Card
*Green Dot primor Visa Gold Secured Credit Card