Late or missed payments, accounts in collections, and other issues can drag down your credit score. Here's what you can do to turn things around.
As you know, negative information on your credit report, especially late or missed payments and more extreme issues like accounts in collections and bankruptcies, drags down your credit score - for as long as seven years. The good news is you’re reading this blog and are getting serious about improving your credit score. The even better news is there are several ways to take action to scrub those black marks from your report.
To start, if you haven’t already, get copies of your credit report from all three bureaus. This is free to you once annually at AnnualCreditReport.com. Be sure to read it carefully and highlight the negative information. If you find any errors or inaccuracies on your report, submit a dispute to have it removed. But as for the accurate items holding back your score, it's time to start making your plan of attack.
1. Pay your debts
Outstanding debts should pop out at you right away. You may be aware of those missed payments - or not. If you’ve moved, for example, and that last utility bill never caught up with you at your new address, that’s a missed payment. Although accidental, it’s still your responsibility to pay it off.
It is significantly easier to start tackling them as soon as possible by working directly with the business that you owe money to. If you can’t pay the outstanding balance off all at once, a payment plan is a step in the right direction.
2. Ask for a Goodwill Request for Deletion
Once you’ve paid off your debt, you may have some leverage with the company that you owed that money to - especially if you’ve been a good customer. You can ask for mercy by requesting a “goodwill deletion” from the company by mail, email, or over the phone.
Be sure to have supporting details and evidence to make a strong case, as they’re not obligated to comply. And be sure to put all communication in writing, so that your efforts aren’t wasted.
3. Deal with any accounts in collections
After six months of non-payment, your creditors will typically turn over outstanding debts to a collection agency. You’ll know it, because collection agencies are normally relentless in tracking you down. The collections manager on your case will work with you to create a payment plan to pay off that debt. Unfortunately, in most cases even after you’ve paid off your debt, collections agencies will tell you they can’t get the information off your account. There is a chance that you can pay them to get it deleted from your account, and that may be worth asking about. As always, get all communication in writing.
Important note: Working with collections agencies to pay down your debt is different than working with credit repair companies. For the most part, credit repair companies end up costing you more and may not necessarily get better results than you can on your own.
4. Wait out the credit reporting time limit
If you can’t pay off your debt at this time, your only choice may be to wait for those negative items to fall off your credit report after seven years. (Bankruptcies take 10 years to come off your credit history.) Please use this as a last resort, as those black marks will affect your scores pretty strongly for the first few years, and the business you owe money to has the legal right to sue you for repayment.
While you’re working on repairing your credit by dealing with past mistakes, it’s also good practice to do all you can to boost your credit score, like paying your bills on time and working with a rent-reporting service like CreditPop to get your monthly payments recorded by all three credit bureaus. These are ways to improve your financial outlook without taking on more debt. You got this!