There is no point to plowing your time and money into credit repair if you have outstanding collections. As long as you have past due balances on your credit report your scores will not respond well to your cleanup efforts. On the other hand, if money is no object, you can pursue both at once; negotiate your debt and start the cleanup concurrently. Otherwise, pay your debt first, and then focus on the cleanup.
Question Collections
Debt resolution is vital, but do not throw money at everyone that reports a balance. If an examination of your report reveals multiple collectors for the same account, there is something awry. Redundant collections are prima facie evidence of erroneous reporting and a sure sign your account has changed hands. None but the most recent claimant has a right to your money, or to report the debt to the bureaus. If you pay a collector that does not own the debt, do not be surprised if you get dunned for the same liability in the near future. Dispute prior occurrences of debt and verify accuracy of all collections before parting with your money.
Forget the Inquiries
If you are denied for a loan you will probably receive a denial letter listing the reasons for the turndown, including your recent inquiries. This list should be read with the understanding that the language is the same for everyone and includes factors regardless of the weight they carry. Inquiries have a minimal impact on your FICO scores, and the impact evaporates fast. A hard inquiry will report for two years, but should have zero influence on the calculation of your score within six months. It is helpful to know that you can have unlimited mortgage or auto inquiries in a forty-five day period of time and they count as just one inquiry against your FICO score. If you have other credit issues, focus on them and forget the inquiries; they will fade away before you know it.
Open New Credit Cards Now
Once you have resolved your outstanding debt and are prepared to get your credit repair project into gear, it is time to open a couple of new credit cards. There are two good reasons for this. First, the FICO scoring model puts extra weight on accounts open after a period of bad history, a score bonus you do not want to miss. And second, it takes approximately six months of reporting for new accounts to yield their score increase, so the sooner you start the countdown the better. Also worth noting, if you have no open revolving accounts your credit repair efforts will deliver languid results at best; new accounts are not an option, they are a critical necessity. Secured cards are every bit as good as unsecured, so if your scores are not great just make the small investment in collateralized cards.
Expect Reporting Errors
Consumer credit reporting is not accurate. Your credit report has errors and those errors are limiting your opportunities. There is a possibility this is not true! But if you have been through a bad patch the chance is remote at best. Once your history has been compromised you slip into an unfortunate group of consumers that are statistically prone to multiple reporting failures. Creditor reporting is best when you are in the mainstream and worst when you require special handling which includes everyone that ever had a collection. Examine your reports with a critical eye and dispute inaccuracies with the credit bureaus.
Keep the Faith
If you have the wherewithal to pay your debt you are already close to your goal of great credit. And that goal can be reached sooner than you think. There is no reason you cannot have FICO scores over seven-hundred within six months. All you need to do is take action. The credit system may seem cruel at times, but when you are able to make the right moves you will discover that it welcomes you back with open arms. Good luck!
