After debt settlement, you should quickly get started repairing your credit. Before you jump right into credit repair, make sure you get some essential information on improving your credit.
Your credit report contains the details about what you need to do to improve your credit score. The negative information on your credit report is what brings your credit score down. The first thing you should do to repair your credit is check your credit report. Make a list of the things that are hurting your credit score and figure out what you can do to improve that information.
One of the easiest steps in credit repair is to dispute inaccurate information. Errors could hurt your credit score, especially errors in how your debt settlement is reported. Check every item on your credit report to make sure everything is correct. If you find anything that’s wrong, dispute it with the credit bureau.
Your credit score is based on five different factors: payment history is 35%, amount of debt is 30%, age of credit history is 15%, types of accounts is 10%, and new credit applications is 10%. Since payment history has the biggest impact on your credit score it’s important that you pay your bills on time. Your credit score is based solely in the information that’s listed in your credit report. Credit scores from FICO and the credit bureaus don’t consider any outside source of information.
You can repair your own credit or you can hire a credit repair company to help you. For a fee, the credit repair company will help you remove damaging information from your credit report. Do a background check on the credit repair companies you’re considering to make sure you’re hiring a reputable company.
You must add positive information to your credit report if you want your credit score to improve. As the negative debt settlement details get older, they should hurt your credit score less. To bring your credit score into the highest numbers, you probably must add several years of positive payment history.
You may have to ask your creditors for a favor. Credit report disputes work best for credit report entries that are inaccurate, incomplete, or unverifiable. You may have to ask your creditors to remove other negative information either as a condition of your payment or as a simple favor. Some creditors will refuse your request, but you may encounter a few that agree to your request.
Negative information will typically fall off your credit report after seven years, 10 years if you filed bankruptcy. If you can’t dispute information from your credit report or convince creditors to remove it as a matter of goodwill, know that it will eventually fall off your credit report.
Settling your debt is a step in the right direction. Although your credit score may suffer in the short-term because of the delinquent payment status, debt settlement will likely help your credit score in the long run. Since a big part of your credit score considers the amount of debt you have, settling accounts and achieving a $0 balance should help improve your credit score.