3 Steps to Taking Control of Your Credit Report
Mechel Glass, CredAbility.org
Over the past three years, counselors at CredAbility have seen a rise in the average credit score among people seeking counseling. More people, and people with better financial histories, are seeking credit counseling.
A person seeking basic budget counseling from CredAbility in 2007 had an average credit score of 560. This score rose to 576 in 2008 and 588 in 2009. In December 2010, it was 589. While the average credit score appears to be leveling off, a rise of nearly 30 points over three years shows how more people with credit card debt have needed help reining in their finances over the past three years.
For people seeking foreclosure-prevention counseling, the average credit score in 2009 was 565, but it rose to 572 last year. Homeowners seeking counseling to avoid foreclosure now have an average income of over $50,000. The rising credit scores are a reflection of who we’re seeing—people with more income and assets.
According to the CredAbility Consumer Distress Index, a quarterly index that tracks the financial distress of average U.S. households, credit scores for all Americans have been relatively stable for the past two years.
Instead of letting the economic crisis decimate their finances, millions of people have been rebuilding their credit as they pay down their debt. Creditors and lenders are still going to report your payment history and loan balances, but there are a few steps you can take to present a positive credit report.
1. Make sure you pay your bills on time.
If keeping up with your credit card bills is still a problem, call the issuer to explain your situation and attempt to negotiate a payment that you can afford. Ask the issuer how this will be reported to the three major credit reporting agencies: Not paid as agreed? Or now paying as agreed, per the new terms? Make certain you get any agreement in writing.
Assess the damage to your credit by getting a free copy of your credit report from each of the three major credit-reporting bureaus through annualcreditreport.com.
2. Write a personal statement for your credit report.
Since prospective employers may pull a copy of your credit report, consider adding a one-hundred-word statement to each of your reports explaining your hardship, whether it’s a job loss or an overwhelming medical debt. All three major credit reporting agencies allow you to add a brief statement through their websites. Most scoring models don’t consider consumer statements in the scoring formula , however, so don’t expect it to sway lenders.
3. Stay away from bogus credit-repair companies.
You’ve probably seen ads for credit-repair companies who say they’ll clean up your credit in a few short weeks—stay away from these organizations. Some companies manage to clean up your credit for a limited time by disputing all of your accounts and sending letters to the bureaus claiming the accounts aren’t valid. But after the credit bureaus validate the accounts and debts, they’ll reappear on your report, and your score will plummet again.
Legitimate credit-repair companies exist, but there’s nothing they can do that you can’t do for yourself—for free.
For people committed to improving their credit score, CredAbility offers online classes at www.CredAbility.org. However you decide to attack your credit, it starts with you. The best way to improve your credit score is to set a goal, create an action plan with specific steps, and follow through on those steps.
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