Improving Your Credit

In March 2011, when I first started researching and reading about frequent flyer miles, my credit score at myfico.com was 605.  I had never had a credit card before and had a collection on my report from a medical bill that my insurance had messed up and forgot to pay.  I figured I had no shot at receiving one of the better credit card deals, as the minimum cut-off is basically around 700, and had no idea how where to start in improving my score.  However, through a lot of research, I started piecing together the necessary steps to take to boost my score.  By May, my score was at 776 and I was on my way to miles and points galore.

This process may take some time and a little bit of grunt work on your part, but it is well worth it.  Once you boost your score, taking care of it is the easy part, and you’ll be able to rack up all the miles and rewards you could ever dream of.  Think of it as a little bit of work in the beginning for a huge reward at the end.

Each person’s credit score and report is unique, so there is no exact set way that will work for everyone.  However, there are some tricks and tips that will help almost all people.

Use forums and other people’s expertise to help you.

This may sound elementary but it is important.  Creditboards.com is an invaluable tool to use to help figure out the best way to go about upping your credit score.  The forums are very active and the sample letters are an amazing resource.  I would highly suggest you sign up for a free account with them and peruse the boards a little go get used to the lingo.  Every time I asked a question, I received a response in less than a day from highly knowledgeable people.

Goodwill Letters for Late Payments

If your negative items are for late payments, send a goodwill letter to the company requesting that they remove the late payments from your credit report.  Cite your ongoing credit relationship with them and your desire to remain a committed customer as reasons you wish to have it removed.  They may not always remove the late payment from your history, especially if it is more recent, but it never hurts to ask.  Feel free to download my goodwill letter as a template:

Goodwill Letter template (.docx format)

Collection Agencies

If your negative items are from collection agencies, you have to determine whether it is worth paying them off or not.

If they are a somewhat small amount,  the easiest and quickest way is to offer the collection agency a settlement.  If you wish to get it removed quickly, then you can offer to pay the entire amount.  If you have more time, then you can offer as little as 30% of the total amount.  They may accept the 30% or come back with a counteroffer.  At that point, it is up to you whether to continue to negotiate or just pay what they ask.

ALWAYS, ALWAYS, ALWAYS do this by sending a letter to the collection agency so that you have a paper trail.  Also, make sure you specify that you want a “PAY FOR DELETE.”  This means that once you send the payment, they will delete the item from your credit report instead of simply marking it paid.  Even if an item is marked “paid”, it is still considered a negative item on your report, so do not accept that.  You want it deleted completely from your credit report.  Feel free to download my Pay for Delete letter as template:

Pay for Delete Letter Template (.docx format)

Disputing an Item

If you do not want wish to settle or you feel that the item is an error on your credit report, then you can dispute it with the credit reporting agencies (CRA’s).  You can do this completely online for each agency; Equifax, Experian, and TransUnion.

If you can afford to wait up to 30 days for a response than you should seriously consider this as your first step.  Oftentimes, negative marks will disappear off your credit report as the companies simply wish not to deal with it.  This can save you a lot of money in lieu of settling with them.

 

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