How To Clean Up Bad Credit
For anyone seeking to purchase an item on credit, whether a home, a car or even with a new department store account, learning how to clean up bad credit is a necessary skill to avoid credit denial. Sometimes a poor credit score or bad credit is the result of life’s struggles and events—but, other times bad credit is the result of correctable errors on a consumer credit report. Credit repair companies charge quite a hefty fee to help consumers correct credit reports—but, most consumers are able to make similar correction requests for free if they understand the credit reporting process. There a few simple steps which consumers can take to correct bad credit that is of no fault of their own.
- Understand your credit reporting. First of all, there are three primary credit reporting groups—and not every account reports to all three credit bureaus. For this reason, one credit reporting entity may list a very high credit score for you—while another may show delinquent accounts or derogatory items not noted on the high reporting agency’s report. It is important to understand that for certain credit applications, information from all three bureaus will be considered—while others may view only one or two reports. It is best to correct your credit as a whole from every bureau rather than only one if bad or inaccurate credit information is preventing you from obtaining credit.
- Request a free credit report. The government has mandated that consumers have the right to receive updated credit reports annually. If you are concerned about your credit score—or have already been denied access to credit, it is time to review the items that lenders are posting about you and your payment patterns or history. Even if you are not currently seeking new credit, it is important to periodically monitor your credit reports for signs of fraud and errors.
- Review your credit report in depth for inaccuracies. Are all of the credit findings posted truly your accounts? With the vast reach of credit fraud and identity theft, many are surprised to discover fraudulent accounts on their credit report that seriously impact an otherwise great credit score. Additionally, consumers who have suffered a divorce or court ordered judgment may be surprised to realize that court ordered payment or account arrangements are not properly reflected on his or her credit report. Many times, an ex-spouse fails to make court ordered payments on a previously joint credit card account or installment loan—affecting your credit rating. Insure that any account listed on your report is truly yours—and yours alone in responsibility.
- Dispute errors on your credit report with documentation. Credit report disputes are done in writing through correspondence with the reporting credit bureaus. Write a letter of explanation related to each erroneously reported item—and back them up with documentation if applicable. You may need to supply divorce decrees or court documents if you were previously determined to have been freed of various debts or obligations. You may need to offer police reports documenting identity theft investigations or previous correspondence with fraudulent lenders or accounts. Be sure to send correspondence via certified mail or an otherwise traceable shipping method.
- Wait for the credit bureau or lender response—and follow up if necessary. Credit correction is not always an immediate or even a rapid response. Several weeks may pass between initial requests and formal response. Remember that it is always best to monitor your credit report before applying for new credit to avoid lengthy correction times during a credit application process! Also, do not be shy about following up. It’s possible that information was received or processed and that you were not yet notified of the findings—or that your initial request for investigation was lost in transit.
- Keep a record of any and all credit investigations and official findings. This may save you time and effort should an account “resurface” or appear in another report or finding in the future.