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Repairing Your Credit Report, One Step at a Time

Repairing Your Credit Report, One Step at a Time By Cyndi Cohen
Published April 3, 2012
Credit Unions Online
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Nearly every credit union member has experienced periods of financial ebb and flow. Some months we’re in great shape, paying bills on time, and perhaps even ahead of the game, saving money. Other times might be tougher, things are tight, and we fall a bit behind. If these temporary financial snafus have left you with a slightly tarnished credit report and you are looking for some basics on credit score improvement, the Federal Reserve Board offers some general tips on fixing your score

For some of us, however, the current economy has left an even deeper mark on our lives as well as on our credit reports. Maybe despite your good intentions and efforts, you have received poorer marks on your credit report than you’d care to admit, and are having some trouble figuring out how to fix those errors, raise your score, and maintain a new and improved status. If so, fear not! Read on for some more in-depth tips on how to begin this financial journey of sorts, and learn about the role that credit card usage and management play in the process of credit building.

5 Tips for Building Better Credit

According to the Federal Trade Commission, your credit report is essentially a file containing your financial profile - where you live, how you pay your bills, whether you've been sued or arrested, or have filed for bankruptcy. The information in this file is used by prospective creditors, insurers, employers, and others when considering your applications for credit, insurance, employment, or a lease.

A good credit report translates to easily accessible loans, lower interest rates, and consequently, lower monthly payments. However, a good credit report requires hard work and the desire for improvement. Whether you are just starting out and working to establish initial credit, or trying to fight back from a downturn and reestablish your credit worthiness, being fueled with the right knowledge and tools to guide your financial behavior will help facilitate the positive changes you hope to see.

  1. Time heals all wounds, even financial ones.

Although our culture is more conducive to efficiency and instant gratification, improving one’s credit report is just one of those things that takes time, good old-fashioned effort, and a well thought out plan. By trying to accomplish this task quickly using some sort of a service advertised on TV, in the newspaper, or on the Internet that promises to do so, will only get you deeper into trouble. It is best to take your time, enlisting your financial discipline and patience.

In addition, poor credit performance won’t follow you forever since the older it gets, the less it counts. In other words, as time passes, the credit problems of the past will fade and be replaced by new and better behavior.

  1. Know what you owe and pay it off.

Organize your credit card bills, determine your balances for each card, and figure out a manageable payment schedule. If you have more than one card, you can add another element to your payment strategy. Maybe you have 3 or 4 cards and cannot afford to pay entire balances on all of them. Determine which card has the highest interest rate, pay that balance and pay minimum payments on the others in order to avoid late fees. Slowly but surely you will get your revolving debt under control.

In addition, it is best to refrain from closing unused credit cards or opening several new cards that you don’t really need just as short-term score lowering solutions.

  1. Rewrite your credit history and learn from the past.

Once you have paid off the debt that was at the root of your problems, begin using one or two existing credit cards again, paying prudently as you spend. Only open a new account for something you truly need, not just to increase your overall limit or vary your credit mix.

  1. Be credit card savvy with some help from your credit union.

When trying to improve your credit, it will make a world of difference to understand how credit cards can actually aid your mission. Up until this point, you may have viewed your credit cards as a necessary evil but you can now begin to see them as helpful tools, which if used wisely, can help establish and maintain good credit, and finance major expenses.

Your credit union can help facilitate this new relationship with your credit cards. Many CUs offer secured cards specifically for the purpose of helping members who are trying to build or repair their credit. For example, listed below are just a few credit unions that offer ideal products especially for this purpose:

  • Navy Federal Credit Union (Vienna, VA) has their nRewards® Secured Credit Card. The amount you designate in your savings determines your credit line, which is then held by Navy Federal. With a $500 minimum, this card was named One of the Best Secured Credit Card by credit.com.
  • Municipal Credit Union (New York, NY) offers their Secured Visa with a credit line up to $5,000 helping members to establish or re-establish credit.
  • Andrews Federal Credit Union (Suitland, MD) features their Visa Platinum Secured. The funds from your Andrews Federal share account secure your card and your credit limit will be based on the amount you deposit up to $10,000. Best of all, the funds you pledge in your share account continue to earn dividends while improving your credit.
  • Apple Federal Credit Union’s (Fairfax, VA) Visa Platinum Secured Credit Builder offers credit lines up to $5,000, secured by funds on deposit at Apple FCU.
  1. Get help from the pros, often for free at your credit union.

If you begin to feel you are struggling with your credit transformation, don’t panic. There are low or no-cost resources available and your credit union is a great place to inquire. These professional credit counselors can help you develop a plan for getting spending under control and paying back debt. Often, credit union programs offer free, confidential financial counseling, education, and debt management with certified counselors who will help you review your credit report, build a structured repayment plan, and figure out a money management solution. The National Foundation for Credit Counseling is also a reliable alternative when seeking help.

 

Sources:
http://www.myfico.com/crediteducation/improveyourscore.aspx
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm
http://www.nfcc.org/

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