As if 2020 wasn't bad enough already, what with a pandemic, lockdowns, and an economic downturn unlike any other, millions of people also lost their jobs… and that will leave millions of us with blemishes on our credit reports that can and, in many cases will, take years to clean up. We all know what the effect of just one missed payment can be, but what about months of missed payments? What about repossessions, evictions, and the inevitable court cases that are sure to arise? Is there anything that can be done to salvage some of your credit score?
Although there really is no good answer to these questions, there are some things that you can do to mitigate some of the damage:
- Review your Credit Report: Even though it is not a particularly pleasant activity in light of recent events, sit down and go through every single item on your credit report. Make a list of the changes (favorable and unfavorable) over the past few months, and then, address each of the unfavorable items individually. What options are available to you for correction of each and every item?
- Put a Statement in your Credit File: Most credit bureaus have the option for you to put some notes, explanations, letters, etc., into your file. Take advantage of those options! While it may not improve your score, it will help future lenders, employers, etc., to see exactly what caused the problems that are in your credit file. And, while it might not seem important to you now, having a note about your job loss due to the pandemic will definitely help to explain those late charges on your credit cards later on.
- Find and Dispute Errors: Errors in your credit file are far more common than most people realize and taking the time to review and remove negative, inaccurate information is vital to maintaining your credit file. Common problems include incorrect name, address, phone numbers, accounts belonging to others, identity theft, data errors, and more. Dispute each and every single issue that you find – identify, clarify, and submit backup documentation to substiantiate your claim, then as that it be corrected or removed. It may take time, but it can and should be done!
- Watch your Credit Score as closely as you do your bank account: With so many free credit monitoring services available, there is really no excuse for not knowing what your score is and exactly what is impacting your score at any given time.
- Make your payments on time: Once you get past your problems and get your income back on track, get your payments back on track as well. Many people figure that there's no way they'll ever catch up or repair delinquencies, so they just ignore them without ever making the effort to get back on track. That's the wrong approach – contact your creditors and work out a plan to get each and every account up to date. You might even be able to negotiate the removal of those late payment notifications in return for catching up, but first you have to try.
- Get your Credit Utilization Score down as soon as possible: Since this one thing makes up a huge part of your credit score, getting it down below 30% is vital to improving your score. (Get it under 7% and that puts you in league with those who have "very good" credit. 1%-3% puts you in league with those who have "exceptional" credit.)
- Increase your Credit Limit: Although this is not always the best route to take, opening a new credit card can decrease your credit utilization, and therefore, increase your credit score. Just be sure that you don't make the mistake of overusing your new credit card and/or applying for too many new cards!
Remember, you're not alone in this situation. Millions of people around the world have been negatively impacted by recent events, so your hard work to repair your credit will undoubtedly pay off in the future when lenders have to decide who among us is worthy of new credit.