How To Clean Up Your Credit Report

Your credit score determines whether or not you will be approved for a loan and greatly affects the interest rate you will pay for borrowing the money. Your credit score also influences your insurance rates and can also affect whether or not an employer will hire you. Cleaning up what’s on your credit report will help you increase your credit score and improve your credit-worthiness. Cleaning up your credit report takes a little time and effort but it’s worth it.  The following steps will help walk you through the process.

Step 1 Get a copy of your credit score

Before you can clean up your credit you’ll need to find out what your credit score is.  You can search online to find free credit score offers. Credit scores range from 300 to the perfect 850.  The average credit score in the U.S. is 723.  If yours is under 620 chances are you will have a difficult time finding any type of financing but there are things you can do to clean up your credit and improve your score.

Step 2 Get a copy of your credit report

You can request a free copy of your credit report from one reporting agency once a year from annualcreditreport.com This will get you started on the road to your credit clean up, however you will need to clean up any errors in your credit report with each of the three major credit reporting agencies; Experian, Equifax and Transunion.  This means at some point you will have to pay for your credit reports from the other agencies.

Step 3 Dispute any inaccuracies

All three of the major credit reporting agencies have an electronic process for disputing errors on your credit report. If you dispute an inaccuracy the creditor has thirty (30) days to validate the item.  If they don’t the credit agency must remove the item from your credit report. If you are the victim of identity theft you should place an identity theft alert on your credit report. Contact the police and file a police report.  That way the flag on your credit report will stay on it permanently.  You will also need to contact the fraud department of each creditor and provide them with the police report so the items can be removed from your credit report.

Step 4 Request validation of charge-offs

Items you never paid and the creditor gave up on collecting the debt are called “charge-offs”.  Request that the credit agency validate the debt as yours.  If the creditor does not validate the account is yours within thirty (30) days then the agency must remove it from your report. Typically derogatory items will stay on your credit report for seven (7) years, bankruptcies for ten (10).

Step 5 Settle your charge-offs

Just because an account is charged off doesn’t mean you shouldn’t pay it.  It just means that the creditor gave up on collecting on it.  Charge-offs are often turned over to a collection agency to be collected.  Contact the creditor collection agency listed on the debt and make them a settlement offer.  Very often you can offer 40-50% of the original debt amount.  A settled debt is better than a charge-off.  Make sure that the settlement offer is put into writing and ask the creditor/agency to mark the debt as “settled in full” as part of the offer.

Step 6 Ask for a goodwill adjustment of a late payment

Reach out to creditors with whom you have made a late payment by sending them a goodwill letter.  This is a letter in which you ask the creditor to correct the late payment that has been reported to the credit agency.  This will usually work if you have just one late payment with the creditor in the past year.

Step 7 Ask that problem accounts be re-aged

If you have a number of late payments with a creditor, contact them and ask that they be re-aged.  Creditors may reward a serious of twelve (12) timely payments by correcting the previous late payments as on-time payments.

Step 8 Monitor your report

Once you’ve cleaned up your credit report keep it clean by checking it 1-2 times per year to monitor and maintain it.