14 Common Credit Repair Mistakes and How to Avoid Them

A good credit rating is an asset because it gives you access to lower interest rates on credit cards and loans. Those with great credit scores also get faster approvals for rental houses, cell phone contracts, utilities, etc. So, if you have a bad credit score, repairing it could save you hundreds of dollars in interest payments and ease your financial life.

But you must avoid certain credit repair strategies as they could worsen your financial situation. Keep reading for 14 common credit repair mistakes people make when trying to boost their credit scores and how you can avoid them.

 

1. Failure to Check Your Credit Report

One of the common credit repair mistakes many people make is not checking their credit reports. You can get one free credit report each year so contact one of the major credit bureaus to get yours. Once you receive your report, check to see if there are any incorrect claims on your report.

If there are inaccuracies, dispute the claims to get them removed from your report. You must then analyze your report to see the reasons why you have a bad credit score. Perhaps you have missed some payments or you don’t have enough credit history. Knowing the cause of your bad score will help you come up with a strategy to fix it.

 

2. Ignoring Your Credit Status

The first mistake many people with a bad credit rating make is ignoring their predicament and postponing any credit repair activities. Yes, a bad credit score can be very depressing.

But becoming aware of a low score should motivate you to work at repairing your finances. The sooner you implement a workable credit repair strategy, the sooner your credit score will improve.

 

3. Disputing Valid Claims on Your Credit Report

Some credit repair advisors tell people to dispute all the claims on their credit report to reverse a bad credit score. This is a bad idea. Some claims on your credit report reflect your payment history and are therefore good for your credit score.

Disputing these claims and getting them taken out could lower your score. Also, if you dispute all the claims on your credit report, the credit bureaus could dismiss your claim for dishonesty. Rather than disputing all claims, go through your credit check report and only raise queries on incorrect charges.

 

4. Involving a Credit Repair Service

Another credit repair mistake many people make is hiring a credit repair company. The steps you need to take to repair your credit are easy so you don’t need to hire anyone to do them. Hiring a credit repair company will cost you money that you may not have.

On top of this, credit repair companies often make promises that they can’t keep. In fact, they often end up damaging client credit ratings by attempting dubious credit repair strategies. You will save time, money and your credit rating by repairing your credit yourself.

 

5. Canceling Credit Cards

If you have a bad credit score, you may want to cancel your credit cards to improve your rating. But this could be a mistake. Credit cards help boost your credit rating as they show that you have a history of borrowing as well as paying down debt.

Paying for items using your credit cards and paying off the balance each month is a means of boosting credit scores during the credit repair process. Canceling the cards will take this history out of your credit report and lower your score.

If you are afraid that you will use your cards and get deeper into debt, put them somewhere hard to reach. For instance, you could freeze them in a big block of ice or lock them in a hard-to-break container. This way, you can pay down the credit card debts and maintain your credit history without getting further into debt.

 

6. Moving Debt Balances to Avoid Payment

Some people that are facing financial hardship try to avoid making credit card payments or loan payments by moving their balance to another provider. But this can only be a short-term solution that could end up damaging your credit rating. There are only a limited number of debt providers so you can’t move around the balances forever.

Additionally, there is a balance transfer fee each time you move your debt so that the total amount owed keeps increasing. Rather than moving your balances, try and get a source of income that will allow you to make the loan payments.

 

7. Filing Bankruptcy

Filing for bankruptcy is one of the worst things you can do to improve your credit score. A bankruptcy report stays on your file for 7 to 10 years and while it stays on your file, your credit score will be bad. Bankruptcy should be the final resort for anyone going through financial trouble.

 

8. Missing Payments

One of the worst credit repair mistakes you can make is to miss loan or utility payments. If you can, you should never miss any payments while trying to repair your credit rating. If you are in a financial crunch, you may have to prioritize your payments.

But rather than missing a payment, try and consolidate your debt so that you have fewer providers to pay each month. Also, if you have any payments that have already gone into collections, you can miss paying those to pay current accounts.

 

9. Using Regular Mail Rather Than Registered Mail

During your credit repair journey, you might need to send letters to your creditors, lenders, collection agencies, and credit bureaus. One mistake many people make is sending these letters via regular rather than registered mail. This means that they never know whether the letter was received.

Additionally, if they ask for proof that they sent a certain letter, they won’t have any. Always send your official mail via registered mail and keep the proof that you sent the letters as you may need them in the future.

 

10. Talking to Debt Collectors

Debt collectors are trained to play on your emotions so that you pay their loan as fast as possible. They don’t care that you have other pressing bills to pay such as your rent or utility bill. So if they call you about a debt, it is best to tell them to reach you via mail and that they should stop calling.

If you’ve already communicated with your debtors via mail and advised them of your payment plan, they shouldn’t be harassing you for payments. Getting into a conversation with a debt collector will stress you out. It can also lead to you making a bad financial decision.

 

11. Making Agreements Over the Phone

Another mistake many people make when trying to repair their credit is making legal agreements over the phone. All your financial agreements and payment plans should be in writing.

Ask anyone that needs your agreement on anything to send their request in writing. When responding, always send your letters via certified mail so that you can have proof that the letters were received.

 

12. Applying for Unsecured Credit Cards and Loans

When you have a bad credit card score, it’s unlikely that you will be approved for an unsecured credit card or loan. Each time you apply for a credit card or loan and it gets rejected, you get a negative ding on your credit report. Over time, multiple applications will worsen your credit rating.

Until your credit score improves, do not apply for unsecured loans or credit cards with major companies. Instead, apply for a secured credit card loan which you can use to build your credit rating.

 

13. Paying Off All Your Debt

Another mistake that some people make when attempting to improve their credit score is paying off all their debt. The key to a great credit score is to have a small amount of debt on your report.

Pay down any credit cards that are maxed out as well as installment loans like auto and student loans. Then have just a small balance on one or two credit cards or a mortgage to show your history of borrowing.

 

14. Falling Back Into Debt

Once you do all the hard work of getting a good credit score, it is important to maintain a great credit report. Stay on top of your payments so that you don’t get negative reports for missed payments.

Many people get their credit up in order to get a mortgage or car loan and then revert to their previous financial behavior. If you want to have a better financial life and maintain a credit score, you must change your financial habits.

 

Learn How to Avoid the Most Common Credit Repair Mistakes

A bad credit rating can make it more difficult and expensive for you to access loans and rental agreements. Fixing it as fast as possible could save you hundreds of dollars in interest payments.

But while attempting to fix your credit score, it’s important to avoid the credit repair mistakes mentioned as they can worsen your credit score. Are you looking for some help with paying off debt to fix a bad credit score? If so, consider getting started with a loan request today.