Getting a negative mark on your credit report is never good news. It likely means that you didn’t pay a bill or debt and the creditor reported the non-payment to collections. There are ways out there to fix your credit after a negative mark.
A single collection account on your credit could easily ding your score by as much as 100 points. Having a low credit score cuts you off from opportunities to get a lower interest rate when you apply for a mortgage or better loan offers in general. If you’re interested in travel hacking with rewards cards, you’ll need a good credit score in order to obtain those rewards cards.
More importantly, this will involve fixing your credit. If you’re wondering how to fix your credit after a negative remark, here are some important steps to take.
Validate the Debt
If you received a negative mark on your credit, this likely means that your debt was sold to a collection agency who then reported it to the major credit bureaus. Here’s the thing though. Collection agencies and creditors make mistakes all the time.
Your first step should be to validate the debt to make sure that what was reported is 100% correct. It’s your right to request validation within 30 days of a collection agency calling you. Even if you’ve missed this window, you can still request validation.
Be sure to request validation by mail and get everything in writing. Many debt collectors have made mistakes in regards to reporting a collection for the wrong person or for the wrong amount so these could be grounds to file a dispute with the three major credit bureaus.
Negotiate with the Creditor or Collection Agency
If the debt has been validated and proved to be yours, the next step would be to contact the creditor or collection agency in an attempt to negotiate. Keep in mind that a negative mark can stay on your credit for up to 7 years even after you’ve paid the balance off.
If you want to remove the collection account from your credit report, you may want to consider negotiating with the collection agency. See if you can negotiate a pay for delete agreement. This would mean that you’d settle on paying off a percentage of the balance and in exchange, the collection agency would remove the negative mark from your credit report.
Pay for delete agreements don’t always work but it is worth a try. You may even want to hire a credit repair agency to help you negotiate and get the ball rolling. According to Credit Glory, getting a collection account successfully removed from your credit history may result in a credit score gain of up to 150 points so it’s definitely worth considering.
If you can get a collection agency to agree, make sure you get everything in writing and continue to follow up.
Focus on Building New Positive Credit History
Continue to focus on building positive credit history moving forward. While you may not be able to change the past, many people have been able to rebuild their credit and even bounce back from negative marks and bankruptcy.
Start by getting a secured credit card with a company like Discover or Capital One. You will need to put down a deposit of $200 to $300 to borrow against as your starting credit limit. Over time, this limit can get increased. Make sure that the secured credit card company you use is reporting payment history to all three major credit bureaus.
This can help improve your score with positive credit history.
Focus on Other Credit Factors
To streamline the process of rebuilding your credit after getting a negative mark on your report, make sure you focus on some of the most important factors that contribute to your score. Some of these include on-time payments, overall credit utilization and credit history length.
Getting a secured credit card is one of the best ways to start building a positive credit history because you can keep your overall utilization below 30%. You may also want to consider getting a secured card that you can keep long-term or one that can be converted into an unsecured credit card eventually. This will allow you to keep all your credit history so long as the card is open.
Other factors that may help impact your score include your credit mix. I wouldn’t recommend going out and buying a new car or taking out a loan for no reason, but the different types of credit accounts you have can help improve your score. As with any type of debt, you want to make sure you can afford to make timely payments and/or put a decent amount down. I don’t think it’s worth it to take out extra debt just to improve your credit mix.
Make a Habit Out of Paying Your Bills On Time
One of the best things you can do to fix your credit after a negative mark is. Commit to paying your bills on time moving forward. It’s important to get on a budget so you can map out your expenses and when you will pay them. Set up bill reminders or even automatic bill pay to avoid late fees.
If you can’t afford to make a payment, be sure to call the creditor to see if they have payment plans or options for you. Communicating early on is better than just letting bills pile up and possibly go to collections.
The bottom line is that there is an opportunity to repair your credit after a negative mark and prevent the situation from ever happening again.
Be sure to keep these tips in mind as you’re trying to raise your credit score.
Have you had to fix your credit after a negative mark?