Dos and Don’ts of Post-Settlement Credit Repair
By LaToya Irby in Credit Repair Debt Relief
Soon after your last settlement has been paid, you’ll want to start repairing your credit. Credit repair is likely necessary if you want to save money on interest, insurance or security deposit. It will take some time to get your credit score back to where it was before you settled your debts, so starting soon is best. Here are some things you should and should not do while you’re repairing your credit.
Start by checking your credit report.
You need to make sure the details of your settlements are reported correctly. For each settled account, the balance due should be $0 and the payment status should say “Paid” or “Settled” or something to that effect. You can check your credit report by visiting AnnualCreditReport.com or any of the three credit bureau websites.
Don’t let errors go uncorrected.
If your settlements aren’t reported as described above, contact the creditor to make sure everything was processed correctly. You can also dispute the error with the credit bureau and it helps if you have a zero balance letter showing your account has been settled in full. Otherwise, you can send a copy of your settlement offer and proof of payment along with your dispute.
Get new credit to help rebuild your credit score.
To improve your credit score, you likely need to have a history of making timely payments. Getting a new credit card or loan could help you accomplish this. It’s especially important if you don’t have any other open accounts on your credit report. If you can’t get approved for a traditional credit card, apply for a secured credit card.
Don’t miss any payment, even on accounts that aren’t on your credit report.
Your credit history is already tarnished by late payments. As those payments age, they’ll hurt your credit score less. But, missing a future payment will generally reverse the healing your credit score has experienced. Since any account has the potential to end up on your credit report, i.e. if it’s sent to a collection agency, you should be sure to pay everything on time.
Change the spending habits that led you to debt.
The last thing you probably want to happen is to repair your credit and go into debt again. Think about what you did to get into debt the first time and figure out how to change those habits. For example, you could create an emergency fund to cover unexpected expenses or save up for large purchases instead of charging them.
Don’t run up your credit card balance.
Payment history is a big part of your credit score and so is the amount of debt you have. When your balances get close to your credit limit, your credit likely suffers and you’ll experience a setback in credit repair. Aim to keep your credit card balances below 30% of the credit limit, probably even better if they’re below 10%.
Give your credit some time to recover. It’s generally easier to wreck a good credit score than it is to rebuild a bad one. Continue making wise choices when it comes to your credit and you’ll likely see your credit score improve over time.