Top Seven Tips for Do-It-Yourself Credit Repair

By Andrew Freiburghouse
Mortgage Credit Problems Columnist

It's your credit, and you want to repair it yourself. That's admirable and possible.

What's more, it's potentially very profitable. Especially if you're seeking to secure a mortgage, either to purchase or refinance a home loan, fixing up your credit is the best thing you can do for your finances.

Here are seven ways you can do some of the fixing yourself, for free. And please note: even if you have good credit, you can still fix it up further using these techniques.

1. Get Familiar with Your Credit Report

This may seem obvious, but it's amazing how many people have no idea what's on their credit report. Then suddenly it's time to refinance the mortgage and credit problems pop up and refinance options are severely limited. Now you're only eligible for a bad credit home loan, which is better than nothing but the rates aren't the best available.

The first step to preparing for that fateful mortgage mission is to understand your credit report. Sit down in your favorite chair, pour yourself a cold beverage, and get really, intimately familiar.

2. Erase Erroneous Credit Report Black Marks ASAP

In an age of increasing identity theft and unscrupulous bill collectors, you don't have to have bad credit to have credit problems. People often don't even know they have a credit problem until they're trying to buy or refinance.

For a first time homebuyer seeking an FHA mortgage, for example, a credit problem that crops up unexpectedly can kill a deal and a dream. FHA home loans, because they typically involve low downpayments, depend heavily on your credit.

If you notice an error on your credit report, do something about it. Call and write a letter to the creditor in question, dispute the charge, and file a police report if necessary.

3. Make Sure Bright Spots Are Noted

Just as it's vital to erase black marks, it's well worth the time and effort to make sure that your good payment history is being noted. Believe it or not, many creditors do not report to credit agencies, or they report to credit agencies under an incorrect name or social security number.

Get credit for the good credit behaviors you've shown.

4. Consult a Counselor, But Don't Pay for the Privilege

There are non-profit credit counseling, debt relief, and debt help agencies that will help you for free. There are also for-profit debt consolidation companies that will help you for a fee.

Both of these resources are valuable.You may proceed to the latter if necessary, but start with the former. These people have the wisdom of experience, and they're giving it away all day. Take advantage.

5. Did You Know That You Can Own Your Own Debt Consolidation Company?

Speaking of debt consolidation, consider opening up your own company, serving only one client: yourself.

That's right. Although it may be well worth paying an outside company to help with debt relief, you can do debt consolidation on your own. Secure a personal loan with a fixed interest rate that is large enough to pay off your other debts, and then pay that consolidated loan faithfully every month.

It may not be easy, but it'll raise your credit score significantly if you can pull it off.

6. Explain Your Credit Issues in Writing, Ahead of Time

If you have credit problems, write out a letter of explanation as to what happened to cause them.

Make sure to emphasize what you learned and how you've changed. Don't excuse, simply explain. Human to human. A letter like this can be put into your mortgage file and have a significant impact on a mortgage underwriter's opinion of you and of your "file."

For all the computer systems used in mortgage underwriting, it's still a human being (the underwriter) who either approves your mortgage or denies it. Make an impact on that human being if possible, and do it in writing.

7. Be Patient with Major Credit Problems

It's simply not possible to magically erase a bankruptcy or foreclosure from your credit report. You just have to wait it out. Many of us hurt our credit score by incurring huge credit card debt in our youth, or buying a too expensive car, or whatever we did when we were young and dumb.

If that sounds like you, all you can do is wait for the black mark(s) to fade. Like an ill-considered tattoo, it will fade, but it may take some time.

About the Author
Andrew Freiburghouse is a writer and businessman. As a partner at Los Angeles tax preparation firm Pronto Income Tax of California, Inc., Andrew has advised thousands of clients on a variety of financial matters. Currently, Andrew lives in Brooklyn, NY.

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