The good news? At one point or another, almost everyone messes up their credit.
Often it’s when they’re young, not earning much and spending beyond their means. Sometimes it’s later when some sort of unexpected event – an economic downturn, a job loss, a divorce, death or tragedy – has occurred. Occasionally it’s because a person wasn’t interested in managing their finances and that catches up with them.
The bad news? There isn’t any “bad news” because people dinging their credit isn’t a horrible “bad news” situation. It happens. Period. It’s not a stigma or a statement on anyone’s character. It’s not a black mark on The Permanent Record.
It’s a common life situation … and common life situations can usually be resolved positively in a number of ways. People clean up their credit and get on with their lives – it happens all the time.
Sometimes an individual will want to get their credit repaired in a hurry. Or they think they need to because they’re going to be applying for a loan. And there are plenty of credit repair companies promising to “solve peoples’ credit woes” for a fee, according to a recent story in The Washington Post.
Here’s what you need to know about those credit repair companies. First, no one can make negative data that’s accurate disappear from a credit report. Second, by law, a credit repair company cannot promise to boost your credit score. Some say they help people correct genuine mistakes or report fraudulent accounts. But, and this is a significant “but”, you can easily do that yourself … free. (As opposed to the “close to $1000” some consumers end up paying, according to The Washington Post.)
If you need some help figuring out how to dispute incorrect information on your credit reports, a quick conversation with your bank or with a local financial advisor could be all you need to make that happen … possibly saving you from paying a credit repair company a lot of money that you could put toward paying down one of your bills instead!
If it was an unexpected event that caused your credit report problems but that’s behind you now, start paying your bills on time. That will show up right away on your credit reports. If you’re going to be in the market for a loan soon, talk to your lender and explain what happened. With so many loan options available today, there might be one that lets you borrow sooner and more easily than you might have thought.
If you’re still in the middle of dealing with a difficult, unexpected situation, do the best you can to keep paying your bills on time. If it’s at all possible, stay out of bankruptcy. It will probably be more difficult or much more expensive rate-wise to borrow if you’re in a dire situation when another loan could become another burden. Even in this case, a local lender may be able to work something out for you. It can’t hurt to ask!
What will improve your credit reports most quickly? Easy – a history of paying your bills on time and not being maxed out on the credit you have now. Like most good advice, it sounds “too obvious” and even “dull.” But it’s true.
If you’ve gotten into the habit of paying bills late and using all the credit you have available, changing that habit will be one of the best favors you can do yourself. It will take some time. It will take some effort. But you’ll learn great money management lessons that will benefit you for the rest of your life.
Nick Maffeo is the President & CEO of Canton Co-operative Bank in Canton. “Smart About Money” is a regular column he writes for the Canton Citizen. Have a financial question you’d like to ask? Email to info@cantoncoopbank.com.