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Steps to take if you have a credit screw-up

credit screw-up

Credit Sesames discusses what you can do if you have a credit screw-up.

Sometimes, life throws a financial curveball. One poor decision or mistake with money management can have long-lasting implications. It might seem as though it’s hard or even impossible to get back on track. Thankfully, there are several steps anyone can take to recover from a credit screw-up.

Ways a credit screw-up can happen

There are a variety of factors that can negatively impact your credit. Everyone’s circumstances differ. Some of these issues might ding your credit quickly, but many take effect over an extended period of time. It’s an important reminder that good financial habits that might seem small can add up to healthy credit. Issues that can result in a credit screw-up include:

  • Late payments. If you are unable to keep up with bills, this can lower your overall credit. If a bill or two go to collections, the impact can be even more significant.
  • High credit usage. If you are using all or most of the credit available to you, this can hurt your credit. That’s because lenders and other groups authorized to pull your credit report want to see that you live within your means. Maxing out credit cards is among the activities that can contribute to a credit screw-up.
  • Many credit inquiries. When you seek out new credit cards or loans in a short period of time, it can raise questions. Landlords and renters want to see predictable credit activity over time, not a dramatic uptick in your requests for additional credit.
  • Out of balance credit types. If you have only one or two types of credit, this factor could work against you. Lenders often like to see a blend of credit on your record. This could include an auto loan, a credit card, a student loan and a mortgage. Limited credit types could be a barrier to the strongest possible credit report and accompanying credit score.
  • Bankruptcy filing. Thousands of people file for bankruptcy each year, and this type of activity can remain on your report for some time. It can pull down your overall report until enough time has elapsed to remove the bankruptcy from your annual credit report.

Steps to take if you have a credit screw-up

You are not alone if you’ve experienced any of these things that can result in a credit screw-up. The journey to healthy credit is personal. Everyone faces unique opportunities and challenges as they manage their finances. The good news is you can begin taking steps to recover from a credit screw-up quickly. Here are several strategies you can use to begin the recovery process:

  1. Get your 3 free credit reports from AnnualCreditReport.com.
  2. Get the free Credit Sesame app. Credit Sesame is a financial app for consumers who want to be confident their finances are under control. The platform uses AI to help consumers achieve credit health and financial fitness by managing and growing their credit and cash together. An all-in-one app to monitor credit score daily, receive insightful credit improvement and finance recommendations, and find the right credit cards and loans.
  3. Assess your credit landscape. Once you’ve retrieved your annual credit reports, study them to understand what they says about your credit health. Each of the three reports varies because the credit reporting agencies – Experian, Equifax and TransUnion – pull data from different sources. Review the types of credit listed under your name and ask yourself several questions. Is everything accurate? Can you locate the list of factors negatively affecting your credit? What trends in your spending stand out? Are there details that seem unfamiliar or even inaccurate? If everything appears to be correct, you’re ready to move on to the next step. If you spot an error or suspect fraud, you should file a formal dispute. This can get your credit reports cleaned up so it’s as accurate as possible.
  4. Plan the steps to build back your credit. Now, it’s time to formulate a plan to improve your credit score. This is key to resolving a credit screw-up. Your plan should include clear goals and a timeframe for taking those actions. For example, if you have maxed out two credit cards and need to get your credit usage back in line, your actions may include, “Pay down both credit cards in the next 6 months” or “Pay $50 extra each month for the next six months March.” Post these steps in a personal planner or in another location where you see them frequently. The goal isn’t to discourage progress. Instead, it’s to inspire you on the journey. You’ve evaluated your finances, made the decision to fix a credit screw-up and have a clear plan to make progress. Your credit report won’t reflect changes right away. It might even take months or, in the case of a particularly severe credit screw-up, years. But the sooner you get started, even with modest steps, the faster you improve your credit health.
  5. Evaluate and adjust. With the Credit Sesame app, you can keep tabs on your credit health, including your credit score. As each month passes, you can check your information to see how you’re doing. Have you succeeded in chipping away at that credit card bill? Are you noticing your credit card balance is smaller with each bank statement? Celebrate these moments. If you have several other steps to take, find ways to start implementing those, as well. If you have a setback and need to adjust, it’s no problem. Recognize that rebuilding credit takes time. You know what needs to be done – and how to monitor your progress.
  6. Maintain and grow a healthy credit mindset. Good financial management takes time. That can be challenging to find amid career, family and other activities. The Credit Sesame app can save you time and effort while showing how you’re doing.

Follow these steps if you have a credit screw-up and you should find yourself well on your way to more robust credit health.

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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

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Published February 3, 2023 Updated: February 20, 2023
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