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Even savvy property investors who know how to manage their money can incur dings on their credit file.
The following 5 steps can help you repair the damage if you find yourself with less than stellar credit:
- Negotiate with creditors to pay off your debts. Once an agreement has been reached, fulfil your part and pay timely and as agreed.
- Consolidate your loans if possible to pay off your debts more quickly.
- If you’re not able to consolidate, prioritise your debt repayment schedule according to what you stand to lose the most should you not be able to pay it off.
To do this, look at the penalties you’ll incur if you don’t pay; (e.g. loss of home) and pay accordingly. Paying off the card with the highest interest rate might make sense, but it’s not always the best option, depending upon your individual situation.
- Use the recent changes to the credit reporting system in your favour by building up your good credit to offset the bad.
- Review your credit report. If you spot debts that don’t belong to you it’s possible you’re a victim of identity theft. Contact the authorities and put a lock on your account to ensure no account activity happens without your express approval.
Also, be sure to take basic steps to protect your identity such as shredding personal documents, installing anti-virus software and locking up your letterbox. You might also want to obtain credit monitoring through one of the credit agencies to ensure you’re made aware of a potential problem quickly.
Once you’ve addressed your credit file it’s time to look ahead to how you’ll continue building up good credit to offset the bad. As the bad credit is paid and after time drops off of your credit report, you’ll see a continual increase in your scores.
To avoid falling back into the same problem, make sure to do the following:
- Pay all of your bills on time.
- Obtain a credit report every year to keep track of any erroneous reporting, either through fraud or negligence.
- Avoid numerous credit inquiries on your report. Too many inquiries can make you look like you’re desperate for money. Only apply for credit when you’re absolutely certain you need it.
- Show stability in your residence, your employer and in a good solid history of savings.
- Use credit wisely, to help build up your good credit and avoid the situation(s) that led to your current credit standing.