Unlock Financial Freedom: Boost Your Credit Score With A 90-Day Action Plan

Step 1: Get a copy of your credit scores and report

Contact all three credit bureaus (Equifax, Experian & Transunion) and receive a copy of your credit report and credit scores.  There are many ways to get your credit reports for free. Annualcreditreport.com will give you a free report each calendar year for all 3 credit bureaus.

At a minimum, you need to run your credit at least one or two times a year to be sure there are no fraudulent charges or mistakes. There are several other free sites that can help you stay in the loop on what is hitting your credit. Most major credit cards will also give you your credit information on a monthly basis, as well as your FICO score. These are good for monitoring, but they won’t usually be as detailed as your free annual report. 

Step 2: Investigate the Negative

When collections or any negative items show up on your report, figure out what they are and where they came from. This is not an easy task when the collection company doesn’t list the original creditor. It is still important to find out who the original creditor was and the amount you owed, even if you find out the debt is yours.

Step 3: Dispute

If there is anything on your credit you don’t recognize, dispute it. You can do this online through all 3 credit agencies. It is their job to track down the truth and make these companies verify 100% that you owe what they say you owe. If they can not verify the debt, by law, they must remove it. The turnaround for this is usually 30 days. Some collection companies don’t want to waste their time or staff researching why you owe them $100 and will usually remove the item or not respond to the credit bureau and they will in turn delete the item from your report.

This doesn’t always work, but it did work for me on one collection.  After disputing the charge, instead of verifying the debt, they removed it from my report. I still don’t know if the debt was legitimate due to the collection company never providing any information about the original creditor. This was the kicker for me. Once the collection was removed, my score jumped 40 points.

Step 4: Debt Verification

If after your dispute, the collection is not removed, you will need to send out a letter to further investigate. Use a “debt verification” letter to help with this issue. You may be asking “What is a debt verification letter?” This letter shows you the details of a specific debt, outlines what you owe, who you owe it to, and when they need you to pay. Legally, a debt collector has to send you a debt verification letter within five days of their first contact with you. There are several free samples available online. After receiving your dispute, the collection agency must send you proof that it owns or has been assigned the debt by the original creditor. The debt collector is not allowed to continue collecting the debt from you or list the debt on your credit report if they cannot verify the debt. If the debt is verified, then it is your responsibility to pay the debt. Also, check your state’s statute of limitations, this may be helpful when trying to remove negative items on your report.

Step 5: Pay Off

I can’t say this enough, Do Not SETTLE a debt if you are in the home-buying process. The collection agency will sometimes offer you a “settlement” as a way for you to pay less money. If you are purchasing a home, this will do nothing but hurt your credit score. Debt settlement tells the mortgage company you can’t pay your bills. If you are already in a home or years away from purchasing a home, this may be a less expensive option for you to consider. In that case, it may make sense. You can also require or request that once the debt is settled, the creditor remove the negative mark.

Work out a payment arrangement if you can’t pay the debt in full immediately. The collection agency is making money regardless of how long you take to pay. These companies pay pennies on the dollar for your debt from other collection companies or from the original creditor. Once you pay in full, ask if they will remove the negative item from your credit report.

Step 6: Follow up and then follow up again

For every debt verification letter you send out, wait 2 weeks before calling to ensure they received the letter. They must remove the item if they can not verify the debt. If after 30 days, there is still no verification and no response from them, dispute the item again, on each of the 3 credit reports, and include a copy of your letter. The 3 bureaus must remove the item if they don’t receive the verification that the debt is yours.

Once you have everything paid, ask the collection company to remove the negative items from your report. Sometimes they will tell you that they can’t remove the item, it’s not their policy, and this is not true. They are the ones who report it, they are the only ones who can remove it.

If they keep telling you no, try to write a “goodwill” letter. I was told under no circumstances would they remove the collection. I wrote the letter twice and it was removed. It all depends on who you talk to and who receives the letter.

If you will do your due diligence, you too can improve your credit score. There are many resources out there if you need assistance or counseling. Check your local resources and don’t be afraid to ask for help if you need it!

Please feel free to reach out to me or comment below if you have any questions.

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Resource: Coping with Debt

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