As human beings, we are prone to making mistakes at some point in our lives. When it comes to making errors of a financial nature, the consequences can not only be serious but also long lasting. Credit mistakes can linger for up to 10 years depending on the situation. It is best to take a defensive stance immediately after the error has occurred in order to get your finances back on track as soon as possible.
Credit is a vital part of a consumer’s financial life. It order to be afforded the best interest rates and certain approval of credit applications for financing, it is important for consumers to do what is necessary to keep credit scores above the 720 mark. When you miss a creditor payment, apply for too much credit in a short period of time, or are going through the process of bankruptcy, you can be assured your credit score will drop considerably.
Here are the steps you need to take to bounce back from credit errors and get your score where it needs to be before the damage is done:
Check In With Your Credit
You should never attempt to guess where you are credit-wise. You need to be clear about where your credit profile stands. Order a copy of each of your consumer credit reports from the major credit reporting agencies. You are entitled by law to receive one free report annually and then for a small fee at any other time. Credit scores are not apart of this report. You will have to pay an additional cost to access your credit score. Review the results to see what information can be improved.
Be Sure of Accuracy
One of the reasons consumers continue to maintain a low credit score is because of basic human error. Credit reporting agencies take information from creditors and enter it into the database. Nearly 80% of consumer credit reports have some kind of error. You need to identify these errors and dispute them with the credit reporting agencies which then have 30 days to investigate the matter and correct inaccuracies. Just clearing up clerical errors can improve your credit score.
Automate Your Bill Payments
Many consumers have drops in credit scores because of time management errors that lead to missed creditor payments. One sure way to stop late or missed payments is to automate your bill payments through your bank. This allows your bills to be paid on time each month which has a major impact on a consumer credit score.
Re-Budget Your Income
A common reason that consumers have credit problems is often due to their mismanagement of their own money. Overspending and not budgeting money that is coming in properly leads to missed payments to creditors. It is important to keep ahead of the monthly bills by budgeting funds each and every month to ensure there is enough cash to meet financial obligations.
Contact Your Creditors
If you have made some serious credit mistakes due to lack of funds, you should be proactive about getting in touch with creditors and explaining your situation. In recent times, creditors have developed alternatives to help those in financial trouble keep accounts current to prevent credit damage. By calling creditors, you can work out different payment arrangements on a temporary basis. Not all creditors will be willing but those who are can help you keep your credit status positive.
Start Cutting Back
If your financial difficulties are going to be long-term, it is best to go back to your budget and start making cuts to your spending habits. Track where you spend every penny and figure out what makes sense to quit spending cash on in an effort to have more money to meet financial obligations in a timely manner.
Recheck Your Credit
Once you get through the first few steps for improving your credit, go back and check your credit again regularly to ensure your credit repair efforts have been paying off. It is also a good opportunity to ensure that your identity and credit information have not been used illegally by other persons, which can also have a serious negative impact on your credit rating over time.
Keep credit scores high should be one of the priorities of your personal finance management. Even if mistakes are made that are as basic as accounting errors or as big as missed creditor payments over several months, consumers have the power and the obligation to ensure their credit gets back into good standing.