DIY Credit Repair — Guide to Fixing Your Credit

If you’re wondering how to improve your credit score to buy a house, car, or qualify for a personal loan, you might be tempted to pay good money to a dubious “credit repair” company that promises to make your bad credit go away. 

Be careful—you will more than likely regret it and in fact, you’re better off taking matters into your own hands. Our DIY credit repair guide will explain why. We’ll start by looking at why “credit repair” companies are a bad idea and explain what you can do to review and correct your credit report information yourself. 

We’ll also look at how you can improve your credit score over time by building better financial habits, and answer some common questions about how your credit score works.

The Truth About ‘Credit Repair’ Companies  

Those “credit repair” companies’ promises sound pretty good, especially if your credit report could use an appointment with “Mr. Clean Magic Eraser!” We’ve all seen the ads, which promise to legally change your credit report, improve your credit score, and give you a fresh start. How much truth is there to these claims?

Unfortunately, in most cases, not very much. There really is no silver bullet for fixing a poor credit score, other than simply making financially responsible decisions moving forward. Unfortunately, most credit repair firms are nothing more than thinly veiled scams. If you see any of these red flags, walk away:

• The company asks for money before doing anything for you.
• They advise you not to contact any of the three major credit reporting companies: Transunion, Equifax, and Experian.
• They claim to be able to change anything on your credit report, even delinquencies that are recent and accurate.
• They advise you to create a brand new credit history by applying for an Employer Identification Number (EIN) to use instead of your Social Security number.
• They advise you to dispute accurate information on your credit report.

If you’re lucky, you might simply end up wasting your money on a scam with nothing to show for your “investment.” More seriously, however, if you misrepresent your Social Security number, apply for an EIN under false pretenses, or provide inaccurate information on a loan or credit application—you are breaking federal law. 

Doing any of these things, even if a legitimate-sounding agency advises you to, could lead to you being charged and prosecuted for serious crimes.

The Good News: Credit Repair Is a DIY Job

The good news is that you can handle your own credit repair legally and the tools to do so are already in your hands. Here’s how to do it:

1. Access Your Credit Reports

The first step is to get hold of copies of your full credit reports from each of the three major credit bureaus so you can assess the situation. You are legally entitled to a free credit report from each bureau every year and under special Covid-era regulations, you are currently entitled to a free report every week through December 2023. These reports can be accessed here.

You can also get your credit report directly from the credit reporting agencies, although you might be charged for accessing more than one report a year. It’s a good idea to check reports from all three bureaus since information might differ and to do so once a year, even if you are not working to repair or improve your credit.

2. Review Your Report

Now go over all your reports line by line. You’re on the hunt for inaccurate information that might be lowering your credit score. Look for:

• Inaccurate personal information including your name, address, phone number, birth date, social security number, and employment information
• Utility, phone, or streaming accounts you didn’t open
• Credit and installment accounts and rental records you don’t recognize
• Accounts in good standing that are still marked past due
• Closed bank accounts that are recorded as still being open
• Incorrect credit limits or balances on accounts
• Unrecognized or inaccurate authorized users of your accounts

3. Dispute Mistakes

You should dispute incorrect information with the relevant credit bureaus, credit card issuers, and businesses. In some cases, you will also need to deal with collection agencies. Write to each party separately and keep copies of everything you send. Here are some sample letters for reference.

4. Put It Right

If you do find evidence of current overdrafts, unpaid bills, or outstanding balances you were not aware of, do what you can to make these right. Pay off—or at least pay down—outstanding debts as much as possible and work with companies to ensure you close down properly accounts you no longer use.

Build Better Financial Habits

Once you’ve put the past in order, it’s time to look to the future. That means doing the work to build better financial habits that will improve your credit score over time:

Pay Your Bills on Time

Financial responsibility starts with paying bills on time. Missed payments reflect very badly on your credit report. It’s crucial to show you can be trusted to pay your bill on time whenever you have been extended credit—be it a phone bill, rent, or car payment.

Make a Budget

You’re flying blind financially speaking if you do not have a budget. Pay your debts first and set aside something, however small, for savings and then use what’s left to cover your unavoidable expenses and discretionary spending. Update your budget regularly (several times a week at first) and consider investing in a budgeting app to help keep you on track.

Pay Off Debt

If you have not already done so, make a plan to deal with debt. Long-term secured debt like house or car loans are often a net positive provided you pay regularly and on time. But carrying high-interest debt like credit card balances will weigh on your credit over time. If you are not able to pay off a loan within a few months, consider rolling it into a lower-interest personal loan.

Avoid New Debt

Just as important as paying off what you owe is avoiding adding to your existing debt pile by borrowing more. The idea here is to improve your credit score so it will cost you less to borrow money in the future, so avoid adding more borrowing, especially high-interest debt.

Maintain Low Balances

While it can be hard to eliminate debt entirely (and you need some debt to show you can manage and repay it effectively) try to maintain low balances across your cards and accounts. Above all, avoid maxing out credit cards to their available limits.

Start an Emergency Fund

No matter how good your budgeting, however, unforeseen expenses like major car repairs, medical costs, or an unforeseen loss of income can throw you off track for months. As soon as you are able, start to set aside a little money in a savings or money account. Ideally, you want eventually to have enough saved to cover 3-6 months of lost income.

Don’t Close Unused Credit Cards

While it might be tempting to cut up a credit card you’ve worked hard to pay off, think twice before closing a credit card. It is often better for your credit score to keep cards open because you retain your good payment history on the card while also reducing your credit utilization ratio.

Common Credit Score Questions

Here are answers to some of the more common questions about how your financial activities affect your credit score.

Does an Overdraft Affect My Credit Score?

Overdrafts on your checking account do not directly affect your credit score because, technically, you are not borrowing money from anyone. Be careful because, in addition to hefty overdraft fees, overdrafts are tracked by a separate banking reporting bureau called ChexSystems which banks will check when you apply to open an account in the future.

How Does a Missed Payment Affect My Score?

Your payment history is the most heavily weighted factor in determining your credit score. A missed payment will remain on your credit record for seven years, although its impact on your score will diminish over time provided you do not miss further payments. That said, it’s still better to do everything you can to pay your bills on time.

How Does Applying for Credit Affect My Score?

When you apply for any type of credit, your lender initiates a formal or “hard pull” credit check. This can lower your credit report by 5-10 points, and the pull will be recorded on your report for about two years, although it will not affect your score after 12 months. Multiple inquiries within a few weeks do not count as separate pulls, so it’s best to “shop” for credit over a limited time.

How Much Will a Secured Credit Card Raise My Score?

A secured credit card can help you establish a credit score quickly, with some new users recording an average score within six months. Results might be less dramatic if you are repairing your credit after a financial setback. That said, secured credit cards are still a great way to build credit without the risks of unsecured credit cards. 

Why Would My Credit Score Drop?

An unexpected drop in your credit score may be caused by several factors:

• A missed or late payment
• A recent application for a mortgage, loan, or credit card
• Your credit-utilization ratio has risen
• Your credit limit has dropped because you did not use your card or you missed payments
• Someone has stolen your personal information and is using it to access credit

Why Is My Credit Score Not Going Up?

Aside from recently missed payments, there may be several reasons your credit report is not going up:

• Your card balances are too high
• You have limited payment or credit history
• You have made too many credit applications over the past year
• You have only one type of credit on your record 

The Radiant Credit Union Difference

Working with an established local lender like Radiant Credit Union can be a big help if you are looking to establish or build your credit in preparation for a major purchase like a car or house. 

As a community-owned financial co-op with deep roots in north-central Florida, we know where our members are coming from and where they want to go.

Unlike big commercial banks, local credit unions like Radiant can take the time to understand your full financial situation and offer financial counseling to meet your needs wherever you may be in your financial journey. 

If you live, work, worship, volunteer, or attend school in Alachua, Bradford, Citrus, Clay, Columbia, Dixie, Gilchrist, Hamilton, Lafayette, Levy, Marion, Putnam, St. Johns, Suwannee, or Union counties, you qualify for membership with Radiant Credit Union. Talk to us about your credit needs today.

Along with the competitive interest rates and lower fees you expect from a local credit union, you’ll gain access to convenient checking and savings accounts, as well as secured credit cards, secured loans, and other products designed to help you thrive in north-central Florida. We even offer credit report reviews and financial counseling services to our members.

Contact us today or click below to learn more about how Radiant Credit Union can help you get the credit you deserve.

GET YOUR CREDIT SCORE BACK ON TRACK WITH RADIANT CREDIT UNION!