Credit Repair: How to “Fix” Your Credit Yourself?
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Your credit score has a crucial role with respect to your finances. It affects your ability to avail of loans, get favourable interest rates, and may even impact your job opportunities and housing options. If you have a less-than-stellar credit history, you may certainly be wondering how to improve your credit score.
While there are credit repair companies that claim to fix your credit for a fee, you certainly have the power to take charge of your own credit repair journey. In this article, we will guide you through the process of repairing your credit yourself with some tried and tested solutions.
Understanding Your Credit Report
Before diving into credit repair, it is essential to understand your credit report.
Your credit report is a comprehensive record of your credit history, including your payment history, outstanding debts, and credit inquiries. It presents a good starting point for improving your credit score, as you would be able to identify where you are going wrong in terms of your score.
You can start by obtaining a copy of your credit report from the Al Etihad Credit Bureau (AECB). Alternatively, you can check your credit score range for free on policybazaar.ae. For this, continue on the site and check out the ‘credit score’ section.
Reviewing and Disputing Errors
Once you have your credit report in hand, carefully go through it for any errors or discrepancies.
Common errors may include incorrect personal information, outdated accounts, or accounts that do not belong to you. You have the right to dispute any inaccurate information with the credit bureaus.
To initiate a dispute, notify the credit bureau in writing or online, clearly explaining the error and providing any supporting documentation. The bureau then investigates your dispute and informs you of the results. If the disputed information is found to be inaccurate, the credit bureau would correct it, which would eventually reflect on your score.
Managing Your Payment History
Your payment history plays a significant role in determining your credit score. Timely payments are crucial for a positive credit rating. If you have missed payments in the past, it's essential to get back on track.
- Start by making a list of all your outstanding debts and their due dates.
- Prioritise making at least the minimum payment on time for each account.
- Consider setting up automatic payments or reminders to help you stay on top of your financial obligations.
By consistently making on-time payments, you can gradually improve your credit score.
Reducing Outstanding Debt
High outstanding debt can have a considerable negative impact on your credit score.
To improve your creditworthiness, focus on reducing your debt load. You can start by identifying which accounts have the highest interest rates or balances. Consider implementing a debt repayment strategy such as the snowball or avalanche method.
In the snowball method, you prioritise paying off your smallest debts first while making minimum payments on other accounts. Once a debt is paid off, you direct the money you were using for that debt towards the next smallest one. This approach provides a psychological boost as you witness progress in real-time.
The avalanche method, on the other hand, emphasises paying off debts with the highest interest rates first. By tackling high-interest debts, you save more money in the long run. Ultimately, whichever method you choose, it’s necessary to stick with it and maintain discipline to gradually reduce your outstanding debt.
Building Positive Credit
While repairing your aecb credit score, it is crucial to establish a positive credit history. Here are a few practical strategies to achieve this -
- Apply for a secured credit card: Secured credit cards require a security deposit and are designed for individuals with limited or poor credit history. After getting this type of credit card, you can make small purchases and pay off the balance in full and on time to demonstrate responsible credit behaviour.
- Become an authorised user: You can always ask a family member or friend with a good credit score to add you as an authorised user on one of their credit cards. However, make sure that they have a positive payment history and low credit utilisation. Your credit report will reflect their account, potentially boosting your credit score.
- Take out a credit builder loan: Credit builder loans are specifically designed to help individuals build or rebuild credit. These loans require you to make small monthly payments - at the end of the term, you receive the money you deposited into the account.
- Keep credit utilisation low: Credit utilisation refers to the percentage of your available credit that you are currently using. Your goal should be to maintain a credit utilisation below 30% by clearing your balances and avoiding maxing out credit cards.
- Have a good mix of credit accounts: By getting a varied mix of credit like credit cards, loans, and a mortgage, for instance, can demonstrate your ability to manage different types of credit responsibly.
Patience and Persistence
While following the strategies discussed above, it’s pretty important to remember that credit repair is not an overnight process. It takes time and consistency to see significant improvements in your credit score. Be patient with yourself and stay committed to making positive financial choices.
You can regularly monitor your credit reports to ensure accuracy and identify any areas that still need improvement. Celebrate small victories throughout your journey and stay motivated to continue your credit repair journey.
To Conclude
Repairing your credit by yourself is an empowering and certainly achievable goal. By understanding your credit report, disputing errors, managing your payment history, reducing outstanding debt, and building positive credit, you can take control of your financial future.
By following these steps and staying disciplined, you can gradually improve your credit score and unlock your way to better financial opportunities. Take charge of your credit repair journey today and set yourself on the path to a brighter and better financial future.
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