How to Rock Repairing Your Credit
Full disclosure. My long-term plan is to NOT HAVE A CREDIT SCORE. I know, this sounds insane, and I'll write more about that in a future article.
In the meantime, I do find value in using credit as a tool. "Good debt" vs. "bad debt" is an ongoing debate in society (and my mind) but, as a business-minded individual, having a good credit score can make or break certain business deals.
When I bought my duplex in 2012, my credit was outstanding - nearly 800. The interest rate on my property is 3.25% - partially from my credit score, and partially because the housing market had pretty much bottomed out at that point.
Anyway, life happened. I lost my job, racked up debt, moved several times, and was not being very good with my money. It hit my credit score big time. That nearly 800 score is now a 697. Ouch. But, if it's any consolation to those of you trying to build up your credit quickly, my score was about 650 in November, and I've gained nearly 50 points in less than 6 months.
Anyway, the whole reason I want to increase my score is because it's time for me to buy another rental property! Since I'm not able to pay cash outright, I'm going to need to finance, and I want to get the best and lowest rate possible - and I'm going to need an excellent credit score to do so.
So, outside of just paying off my balances, I knew there had to be another way to boost my score. I did some digging, and it turns out you can write what is called a "Goodwill Letter" to your creditor to see if they'll remove a late payment for you. It's no guarantee that they will, but it's definitely worth a shot.
There are really only 3 instances in when you should write a letter like such:
1. If there was a processing error on their end. Let's say you tried to pay your bill and encountered a technical error or glitch but it didn't go through. This is grounds for a potential removal by the creditor
2. Your autopay didn't pay. Whether it didn't go through because of a glitch in the system, lack of funds in your account, or funds were transferred but still not debited, that's another reason to reach out.
3. You're human and made one mistake. You have an excellent credit history with the creditor outside of this one time, and you have demonstrated your ability to consistently pay on time since, the creditor may grant you some grace and not hold that against you.
I'm going with option 3. I found a sample "Goodwill Letter" to a creditor template online, but there are plenty of different ways to approach writing the letter.
To whom it may concern...
In general, your letter should contain the following:
Your address on file for your credit report
Your account number
Make sure you mail it, not e-mail it
Keep it short, sweet, and to the point
Explain why you missed the payment
Politely ask to have this item item removed form your credit report
So, my letters have been mailed, and now I'm playing the waiting game.
I went this route because it was cheaper and probably safer than working with a credit repair firm. Hopefully it will work out in my favor, but the worst they can tell me is "no" and at least I can say I tried.
But, the best way to keep your credit in good standing is a budget. Also, don't pay the minimum payment, try to pay your account in full each month, and if possible, use cash to pay for as much as you can! These things will help keep your credit in good standing, at least until you can go off the radar.