Financial Wellness: Rehabbing Credit

stampsBy Morgan Taylor, Housing and Financial Counselor, West Cook Homeownership Center

While many of us use spring as a reason to clean up our homes and yards, it’s also a good time to clean up your credit. If your credit is good, an annual checkup can make sure it stays that way. If your credit isn’t in good shape—or if you’re not sure where it stands—there are a few things you can do to get back on track.

In my work at the West Cook Homeownership Center, I take pride in preparing clients to become homebuyer ready. A large part of that process is reviewing their credit reports. Many have never looked at their own credit in fear of what the scores may be or what all that data means. They dread seeing the damage that may have developed over years.

Professionals like myself highly recommend reviewing your own credit report at least twice a year to verify that all the information is accurate and up to date. There are many websites from which to pull your credit report, but are unsafe or charge fees. The site annualcreditreport.com is free, safe, and accurate, and allows you to get your credit reports from the three major credit bureaus  (Equifax, Experian, and Transunion) once a year.

When you obtain those three credit reports, read over them carefully to look for errors and outdated information. If you find any, contact the appropriate credit bureau as soon as possible to have them corrected. Also, look for old lines of credit that you no longer use—even though you cut up that old store credit card, for example, it will still show up on your credit report until you call to close the account.

You should also review the list of credit inquiries on the report—these are companies that have checked your credit, such as anyone who may be considering you for a loan or a credit card. If you see a company that you have not had any interaction with, contact the credit bureau to find out more.

If you see areas of concern on your credit report, such as missed or late payments, consider why those have occurred. Do you need to set up reminders to ensure that you pay on time? Do you need to contact the creditor to change your payment schedule? You will find that many banks and other creditors are willing to work with you to ensure that you can make payments and keep your credit clean. The end of your credit report should have a directory with numbers associated with each account; these numbers are a great place to start getting some accounts understood and resolved. Be wary of companies offering to clean up your credit for a fee.

Budgeting is another good way to make sure you have enough to make those payments and clear out your debt. By keeping track of your monthly expenses to see how much you have left over, you can find ways to cut back on spending and pay more toward your debt.

Other healthy ways clean up your credit can be found at your local bank. Most banks offer the Credit Builder program to help increase your credit scores. Another way to enhance your scores is to open up a secured savings account at a bank. These types of programs can take between 12-24 months to complete but throughout the program you will see changes increasing your scores right away.

If you’re cleaning up your credit with the goal of buying your home, contact the West Cook Homeownership Center at (708) 771-5801 to take advantage of our free financial counseling services. Learn more at www.westcookhomeownership.org.

Photo: Flickr user Joel Kramer