Inexpensive ways to start improving your credit

An easy way to start improving your credit is to start with outstanding collections, the collections section is usually at the top of a credit report and it is the first thing a lender sees when they consider giving a loan.  A lot of times there is a big list and it can be very intimidating, but if you break it down in to more manageable sections and commit to working at it over time, you will be rewarded with a payed off collection history that will show as a positive to a lender.

A good place to start is by getting a current list of your outstanding collections and one of the best places to start is with a current copy of your credit report.  These are very easy to get now, they can be accessed and purchased on-line by going to the reporting companies websites.  There are three major credit reporting companies, Equifax, Trans Union, and Experian, but in our area Equifax is the most widely used credit reporting agency and would be the best one to start with.  When you go to equifax.com they have a product called Score Power that you can buy for $15.95, that will get you your Equifax report or you can buy all three for $29.95.  One nice feature on their Score Power product is that it will let you run “what if” scenarios to let you see what effects the changes you are making should have on your credit score.

Many times I see a large list of 15 to 20 collections that total $300 to $500 and a majority of those range from $5 to $20 a piece, after you have your credit report you can identify the size of each collection and work out a plan to pay them off.  As you can see just setting aside $100 a month to put towards your collections will usually pay them off within a matter of a few months. 

Now if you find you have $1,000’s in outstanding collections, you will still usually find several smaller ones mixed in, so concentrate on the smaller more manageable ones to begin with.  Any paid collection is a positive in the lenders eyes, so even if you can’t payoff the larger collections quickly, paying of the smaller ones will show the banks you are making an effort to repair your credit.

One last thing to remember is to get receipts from the companies you are paying off and keep them in a file.  Credit reports take time to update and most lenders will accept the receipts as proof of the collection being payed off.