DIY Credit Repair
In an effort to find a quick fix to bad credit, a lot of people turn to credit repair companies, often lured by unrealistic promises such as 'erasing your bad debts' or 'removing CCJ's from your credit report'.
It is wise to avoid such hyperbole because there is no quick way out of bad credit, it takes time and significant debt reduction to repair your credit. Much of what credit repair services charge you for, you could do for yourself, only in extreme cases is credit counselling really necessary.
Below is how you can tackle the problem yourself, save yourself the money and come out a more learned credit consumer:
Step 1: Find out what your credit score is
In the UK there are several organisations carrying out credit
scores/ratings but the main 2 are Experian and Equifax, although
they both charge a fee to show you a report of your financial
activities (credit report), Experian has an introductory offers
whereby you can get your credit report free of charge for a limited
period. See their website: experian.co.uk
Sign up and obtain a free copy of your credit report, it should also tell you your credit score.
Step 2: Check for errors
It is possible that reporting errors contributed to your having
a bad credit score; credit reference agencies rely on information
they receive from sources such as your bank, credit card issuer
and other creditors, if they make a mistake, the credit reference
agency has no way of verifying it, it is then left up to you to
challenge it or it stays in your credit history.
Review your report carefully, and if there are mistakes, call the credit reference agency that compiles the report notify them of the mistakes.
Step 3: Budget and prioritise
A key part to what builds a credit rating is financial responsibility,
missing payments or paying late hurts. It is important to make
a plan for paying down your debts, prioritise the debts that cost
you the most in interest repayments but make sure you at least
make the minimum repayments on all debts.
If your debts are too big to manage on your income, seek advice; across the UK there are local Citizens Advice Bureau offices (find yours here), from where you can get free advice, The Citizens Advice Bureau is a non-profit organisation, they also offer advice on other domestic issues.
Step 4: Continued usage
Some people will try to avoid falling into debt again by cancelling
all their credit card accounts, the trouble with that approach
is that your credit history will stagnate too.
Keep at least one credit card which you use and pay off every month, this will increase positive entries in your credit history thus giving your credit rating a boost. If you feel you can't control your spending, request to have your credit limit lowered to an amount you'd be comfortable with.
Further reading:
Credit cards for people with bad credit - Bad credit credit cards
Loans for people with bad credit - adverse credit loans - Prepaid credit cards