TBT: Repairing Damaged Credit

Ask Gabby is a series of blog posts answering questions that I have received from friends. If you have a question about how to be more financially savvy or just need budgeting, saving or couponing tips you can just ask, me — Gabby! Facebook, tweet (use #AskGabby) or email me at GetYourWorthOn@gmail.com.

Question: 
Gabby: I maxed out a couple of credit cards a few months ago and I want to repair it. Where do I start? Do you have any tips/advice on how to repair damaged credit?

Answer:
In one of my advice articles — Credit Scores, I shared how your credit score is the number that represents your history with money. The higher your number is, the better. Sometimes things happen causing our credit to take a hit, but it’s something we, ourselves, can fix over time. Below are a few steps to help raise your credit.

• Know your credit report: You can pull a free credit report at www.annualcreditreport.com. To improve your credit, you need to know what’s making your score bad.

• Contact your lenders: Start contacting any charged off or collection accounts to arrange payment options, paying these items off, even if only one at a time, will help repair credit rather than taking out new credit accounts.

• Take care of medical bills promptly: As long as you are making an effort to pay down your medical bills, they are less likely to negatively affect your credit scores. Most people aren’t aware of the fact that medical bills have a huge impact on bringing down your score if left unpaid, and they are less likely to fall off of a report after an extended period of time.

• Pay on time: Just one late payment can lower your credit score, so avoid paying late bills and late fees by scheduling your bills online.

• If you really need a loan: Apply for a secured loan or secured credit card, lenders are more likely to lend if they have “collateral” – if your credit scores are very low. Collateral options vary by lender, so contact your lender for the options they offer.

The best route to go if you are aware you are not going to be able to meet your existing credit obligations are to remain in contact with your creditors, try to setup payment arrangements, or defer payments if that is an option. Anything paid is better than no payment at all, and keeping communication open with a lender is going to keep you in better standing.