Credit report cleanup: Example
In the beginning his credit score was 535. He was mired in more than $20,000 of debt, and 13 of his accounts were delinquent, though many were only $200 or less. He knew he had to stop the collectors and find a way out of debt.
He made a plan. First, he visited annualcreditreport.com and collected his credit reports from all three bureaus. He then outlined each debt, the date each account went delinquent and the date the last payment had been made, his account numbers, the collection notices and any other pertinent details.
He hadn’t kept great records, but he saw some debts on his credit report that he didn’t recognize. So he took action.
“Next, I challenged every single item, ensuring that each collector could verify the debt and had the proper paperwork to validate their collection efforts,” he says. “This resulted in four or five items being dropped.”
Then he tried to reduce each verified debt. “I went bottom-up, calling each debt collector starting with the lowest value, making offers by telling them exactly how much I could budget as an offer to settle,” he says. He also asked each if it would remove the delinquent account from his credit report entirely. He says it’s not common for creditors to do this, but some did.
“Across the board, I settled for less than half of what I owed in every case,” he says.
Last, he began restoring his credit. He was taking college courses on a tuition reimbursement program, but he applied for a student loan anyway. This helped him establish enough credit to qualify for a basic credit card. He also began monitoring his score monthly and stuck to smart financial habits, such as paying his bills on time. About a year later, his credit score hit 640 — the minimum required for him to get an FHA loan at the time. Just 26 months after beginning his efforts, his credit score skyrocketed from 535 to 733. Nowadays, it hovers around 800.
“Through disputing, negotiating, settling and rebuilding, I was able to go from needing a large deposit for an apartment to buying a home of my own,” he says. “As rent continues to rise, this investment has paid off several times over, and I have built equity in the house itself. I couldn’t have done this without learning how to restore my credit.”
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