Like an exercise plan, credit repair is frustrating when you aren’t seeing results.
1. You haven’t learned the Five Factors. You can’t solve a credit score puzzle without understanding the necessary pieces. Learn more about how your credit is graded here. Education is the first step.
2. You don’t understand accruing interest. Debt is a primary cause of credit damage. Understanding how to maintain and reduce your burdens is the first step in credit repair. Consider the following example:
Micaela has $12,000 in private student loan debt. She was fortunate to secure a loan with a fixed interest rate of 4.5 percent. Her lender has provided a 30-year payoff plan, allowing her to pay only $40.00 a month. “This is great!” Micaela says. “I won’t have to worry about student loans payments overwhelming my budget!”
While Michaela’s new grad salary is safe, her lack of understanding is going to cost her nearly $10,000 in accrued interest over the next 30 years. For those of you keeping score, sticking to the minimum payments will cost double the initial loan amount. On the other hand, making double or triple payments will drastically reduce her accruing interest, payoff time and credit utilization ratio. Search the web for quick calculators like these to help you form a payment strategy. Avoiding the effects of interest is sure to give your credit score a boost.
3. You want to start fresh. You’re committed to a clean financial life; you’ve turned over a new leaf; the world is your oyster, etc. Speeches abound when you’re excited about something new, but you can’t start fresh by burying past mistakes, especially when it comes to credit. Many citations have the power to remain on your credit report for 7 to 10 years, forcing you to deal with the backlash whether you like it or not. Good for you for making the choice to change your future; do it the right way by addressing your past first.
4. You’re still attached to financial anchors. Also known as being a cosigner, you’ve attached yourself (and your credit score) to outside forces. Allowing another person to sign up for a joint credit card or use your score to secure a loan is a kind gesture, but it doesn’t bode well for stable finances. Take a hard look at how your cosigning duties have impacted your personal credit. It may be time to cut ties.
5. You haven’t sought help. You have the power to repair your credit alone, but the process is easier and more effective with the right tools. A professional analysis of your credit score will help you understand your weakness, how to improve and strategies for continued strength. Don’t be discouraged by a stall; recharge your credit by seeking proactive solutions.