How to Organize Your Debts Before Starting DIY Credit Repair (5 Steps)

Whenever I’ve talked with someone about credit repair over the years, inevitably, the biggest hurdle they face is getting started. Debt and bad credit can feel overwhelming, and a lot of people just don’t want to deal with it. 

That’s understandable. But getting organized is the first step if you really want to change your situation. You need to understand what’s in your credit reports and what’s hurting your credit scores the most before you can create a plan to improve your credit. 

I want to note upfront that if you are having trouble paying your debts on time or are in a financial crisis, your immediate goal should be to get help with your debt. 

Once your financial situation is stable, then you can look into credit repair. When you’re ready to repair your credit, here are the steps you should take to get started.

Step 1: Conduct a Comprehensive Debt Inventory

The place to start is with your credit reports. You can get your credit reports for free at AnnualCreditReport.com, or you may already subscribe to a credit monitoring service. 

Either way, get your most recent credit reports from each of the major credit reporting agencies. It will help you understand what accounts are reporting, and what the latest information shows. 

I suggest you make a list of your accounts with the following information. Here’s an example of a spreadsheet template that could help:

Note: Your credit limits and balances should be listed for any open revolving accounts. For installment accounts, you can simply list the balance. These details may not be available for closed accounts. Calculate utilization by dividing the balance by the credit limit, then multiplying that result by 100. 

I also recommend that you get your credit scores. There are many places to get free credit scores, or you may have access to them through a paid service. Either way, make sure you get a credit score that corresponds with each of the three major credit bureaus. 

Step 2: Categorize and Classify Your Obligations

For each account, your credit report will list the type of account. Make note of those. 

Credit cards will be listed as revolving accounts, charge cards may be listed as open accounts, and loans — auto, mortgage, student loans — will be listed as installment debt. 

You may also find your credit reports list collection accounts or a prior bankruptcy. Consumer credit reports don’t generally list tax liens or judgments, but if yours do, you may be able to dispute them. 

Categorizing your accounts can be important because different types of accounts may require somewhat different approaches. 

It’s also worth noting that sometimes repairing credit involves getting new accounts, rather than just disputing existing ones. If you don’t have an open revolving account, you may want to consider getting a credit card. If you don’t have an open installment account, a credit builder loan may be helpful.  

Step 3: Prioritize Debts Based on Credit Score Impact

Prioritizing your debt for credit repair requires some strategy. There are two main questions you need to ask:

1. Which items are hurting my credit scores?
2. Which items can I actually do something about? 

To answer the first question, get your credit scores and see what they list about the top factors impacting them. (These are often referred to as “reason codes”.)

For example, some credit score factors you may see can include: 

• Number of accounts with delinquency
• Time since most recent account opening is too short
• Amount owed on accounts is too high

Look at the list you created earlier and make a note about how each one fits into the list of reasons on your credit reports. Don’t worry if these reasons seem a little technical. Look for patterns, like payment history or debt levels. 

Again, not all factors have the same impact on your scores, so be sure to also review the main credit score factors to understand which ones may be affecting your scores the most. 

Then, once you’ve made that list, you need to think about the second question: Which items can you fix?

The accounts that impact your credit scores the most may not always be the ones you can do something about. 

One of the top factors that impacts credit scores, for example, is payment history. If your credit reports list several late payments on credit cards over the years, it will be tough to get those removed or updated. 

You can try to dispute them, but many credit card companies quickly and efficiently respond to those disputes with evidence that they are accurate. But if high utilization rates on your credit cards are bringing down your scores, you may be able to address that more quickly. 

On the other hand, balances on installment loans typically won’t be a factor the way it is on credit cards. That’s worth keeping in mind as you decide which debts to pay off first. 

For many people, the highest impact will come from:

• Reducing high utilization on revolving accounts
• Getting collection accounts or other negative items removed
• Adding positive new credit references to your report
• Paying on time going forward

Step 4: Prepare Documentation for Disputes

You have the right under the Fair Credit Reporting Act to dispute information in your credit reports that you believe is inaccurate or incomplete. 

You can file a dispute with the credit reporting agency, which must verify the information it reports with the source. If it can’t be verified, the bureau must stop reporting it. 

The dispute process is the key step in many credit repair efforts. Information is disputed with the hope that it won’t be verified and will be removed. Sometimes it works, and many times it doesn’t. 

Credit reporting agencies get a lot of disputes, and the process is often automated. 

You don’t need proof that an item is wrong to dispute it. But if you do have documentation, include it. It may help. Examples of proof may include:

• Statements or records showing the correct payment history, balance, or account status
• Any written correspondence with the lender, especially acknowledgments of a payoff, settlement, or error
• Identity theft documents (police reports, ID theft affidavit)

Check with the individual credit bureau for instructions for filing a dispute. You can file online or by mail, and you’ll be required to provide certain information to verify your identity. 

Step 5: Consider a Credit Repair Service if the Process Seems Overwhelming

DIY credit repair can save you money, and for most people, it’s a viable option. But it takes time and effort on your part to review your reports, file disputes, and decide what to do next if you don’t get the results you expected.

If you don’t have the time or energy to tackle credit repair yourself — or if you find yourself promising you’ll get to it “someday” — you may want to consider hiring a credit repair firm. 

They systemize the dispute process, including follow-ups. And since credit is their focus day in and day out, they will often have a better idea of which approaches are more likely to get results.

Just be realistic in your expectations. Credit repair firms can’t erase negative information just because you’re willing to pay them. 

A Little Organization Can Lead to Lasting Repair

When it comes to improving your credit or your finances, getting organized is often the hardest but most important step. 

If you take the time to review your credit reports, really understand them, and then create a plan to improve, you’re more than halfway there. A little organization up front will make it a lot easier to tackle the task. 

Finally, if you are planning to get a mortgage soon, be very careful about adding new accounts or disputing errors. Talk with your loan officer first, as these actions may affect your credit scores and your final mortgage rate.