How to Fix Your Credit Score

If you look online there are a thousand YouTube videos, blogs, and websites about this subject. Entire books have been devoted to the subject, and there are dozens of companies offering to you fix your credit for money. But the truth is that 90% of it you can do yourself. Some people may need the help of a credit repair company, and some people may find it easier to just pay someone to do the hard work. But most of you can do it yourselves. If you are a millennial or you have not yet established credit, some of the strategies I will go over will also work for you to establish credit much quicker than you thought.

I tried to watch a few YouTube videos before I wrote this article to see if anyone had any good ideas I didn’t know about. But after listening to youtubers drone on and on they tended to say you should pay your bills on time and ask to raise your credit limits. Which is good advice, but most people will just charge more after they have higher credit limits. So, I’m actually going to tell you not to do that especially if you have a lot of credit card debt and you are bad about charging too much.

For those of you who don’t know me and my story, I will just give you the short version which is applicable to why I know what I’m talking about. I owned a mortgage company for a number of years. I helped many of my clients for over a decade to improve their credit. I also lost everything in 2008 when the mortgage crisis happened. I had the perfect storm of owning a mortgage company, and I was in the process of flipping a house. The flip house didn’t sell, the mortgage company wasn’t making money and I also owned the commercial building the one of my two mortgage offices was in. The bank ended up taking my house, my flip house, and my commercial building. So, I had three foreclosures on my credit report. Then the bank that had the second mortgage on my flip house ended up suing me for $80,000 for the balance of the second mortgage. I also had racked up about $250,000 in credit card debt and I had $50,000 personal loan. All of which I could not pay. So, as you can imagine, I had about the worst credit a person can have.  

After the sheriff came and knocked on my door and told me I had to get out of my own house because the bank was taking it I left the mountains and decided to head to the beach. I spent about 3 years just working crappy jobs and trying to survive. I became an expert at staying off the grid. I obviously didn’t open any new credit cards because my credit was horrible. I didn’t have any old credit cards because they were all shut off for non-paymet.

I moved in with a girl that put all of the utilities in her name, I wasn’t on a lease, I was untraceable. I wouldn’t let anyone pull my credit because I knew they needed an address and then all of my creditors would know where I was. Just imagine Jason Borne, that was me. After about 3 years I finally got a sales job making decent money. Now it was time to get a bank account and I knew it was time to re-emerge into society. When I went to get a bank account my credit was so bad, I couldn’t even get a checking account at a bank. I had to have my boss co-sign on my account to open a checking account just so I could deposit my paychecks. I decided I would go and talk to a bankruptcy attorney to clear up the old debt. The attorney told that now that I had a job, I was making too much money to file for bankruptcy. He told me to just keep my head down and keep ignoring the debt because now I was almost 5 years out from when all of my financial troubles started. That is an important fact to know if you have judgments or liens on your credit report. The relevant date is when the event happened. Not when they reported it, or the last time they reported it. So keep that in mind when we talk about how to fix your credit mistakes. The advice my BK attorney gave me was just to keep my head down and ignore the creditors for 2 more years because after 7 years in the state of Florida your debt becomes uncollectable. And, he said, if I get nasty grams after the 7-year time frame he will write a cease and desist letter for a couple of hundred bucks and the problem goes away. This doesn’t keep a creditor from renewing the bad debt on your credit report. They do have that right, but I found that most of them didn’t do that. They did, and still do keep selling my old uncollectable debt to stupid people who try to collect from me. It’s been like 12 years now and I still occasionally get a letter in the mail that says “we have accired your Mastercard debt and even though your balance is $50K we will accept $16K if you call us today”.  Ha… good luck with that one!

Ok, there were some pearls of wisdom in that explanation if you have a lot of debt to deal with. But, most of you probably just need some general help to clean up your credit report and get your scores up. So, I will go over some simple strategies to get you on the path to awesome credit.  

STEP ONE

The first thing you need to do is get a current copy of your credit report. You are entitled to a free copy once a year. Look over it and see if there are any mistakes. Look for judgements, collections, and liens. You may find old collections from a telephone company at an old address, or a power company and that sort of thing. Check everything for accuracy and see what needs to be fixed.

STEP TWO

If you have judgements and liens and they are less than 3 years old and the balance is small. Just pay those off and get them off your credit report. If you think you paid them or the balance is incorrect, or if the three bureaus are reporting the information differently you can dispute them. You need to send copies of everything, never originals. Send a letter to the company reporting the incorrect information with any documentation you have about why you think it is wrong and send the same letter and info to each of the reporting agencies that are reporting it on your credit report. The company reporting it also must have an address on your report. If they don’t and you can’t contact them just send a letter to the credit bureaus and tell them the information is incorrect. They must open an investigation and they have 30 days to figure out what is going on. If they cannot get in contact with the creditor, or if the creditor can’t verify the amount you owe… then poof… it’s gone. They are required to remove it. I got a lot of things off my credit report like this. This takes some tenacity because they will try to ignore you and put you off. They think if they make it difficult you will give up. But you won’t give up, you’re on mission.

STEP THREE

Next look at what accounts you have open. I found old credit cards that I had opened at places like Banana Republic when I was in high school to get 10% that I never used again and forgot I even had the account. But, they still showed on my credit report as open revolving accounts. You need to keep a minimum of three open revolving accounts. If you have more than three and some are old like these close them down. Most people will tell you to never close an account because it will affect your credit. But, I think at this stage of the game it better to just close those old ones to start fresh.

That concludes the house keeping portion of credit repair. Now, I’m going to tell you about the strategies that made my credit score shoot up fast.

Strategies to get your score up fast

There are three kinds of credit that show up on your report.

Revolving- these are credit cards and that type of debt. They don’t close when you pay them off. They just keep going like a revolving door.

Installment-these are loans like car loans. They have a balance and you pay it down until it paid off and then the account is closed.

Mortgage– I think you understand that one.

The key to getting your score up quickly is by opening some new revolving accounts and installment accounts. If you have a mortgage that carries the most weight. But, I’m assuming most people reading this are trying to fix their credit so they can start to invest in real estate.

Tactic One

The installment loans will really make your credit improve. This will cost a little money but it is well worth the expense. Go to your local bank and tell them you want to open a “secured revolving account”, and a “secured installment account”. That is the important part so make sure they do it right. A secured loan means you give your money to the bank, then they loan your own money back to you. They charge you a fee to do this, and they charge you interest on your own money they are “lending” you. I know it is ridiculous, but this is the game we have to play. With the revolving loan, you can take money out and use it. But, don’t do that. You are not good at paying your bills that is why your credit sucks. Sorry, but that is why you’re here reading this. The installment loan will be paid out to you and then you must make payments on it. Just tell your banker you want to have both of these put on auto-draft so they pay themselves back. So you can set it and forget it. You need to set them up for a minimum of 6 months. I would do 12 if you can be without the money for that long. And put at least $500 in each account. So this tacktic will take a grand of your own money, you need to pay a few fees and interest. But over all you will get your $1,000 back and the whole thing might cost around $200. It could be a lot less. It just depends on the fees your bank charges. It will be worth worth it.

After the 12 months I did this I pulled my credit and after cleaning up the mistakes, disputing the collections and the secured loans… my credit score was over 700. I couldn’t even believe it. I want to be clear that this is what worked for me. I’m not a lawyer, I’m not a CPA, and I’m not a credit counselor. In fact, some of these suggestions may even go against what the other ‘pros’ say you should do. This is what I did, and it worked. I’ll post some links below that can also help. Some are free, and some cost money. And _________ is sponsoring this post and I make a little tiny commission if you click that link. But they are awesome and if you want them to help you, I might as well get the credit for leading you to them.  

If you have questions or comments let me know your thoughts I will try to help as much as I can. 

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