Deep Clean Your Credit Report

When was the last time you took a good, hard look at your credit report? Identified and disputed errors? Made a plan to resolve any issues that are damaging your credit score? Worked toward improving that score? You haven’t done that?

Sadly, unless a person is specifically interested in getting a credit card, buying a new car, leasing a new apartment, or even buying a home, most people don’t pay that much attention to their credit report. And when they’re ready to make that big purchase? Often their credit score isn’t ready… that’s right, not paying attention to your credit report (and credit score) can not only cost you more in fees and interest, but it can even keep you from getting that new car or that new home. The best way to avoid that kind of disappointment is to pay attention to your score right now… long before you’re ready to get that new line of credit.

Start with getting your complete credit report, which will contain information about your credit and payment history, new credit inquiries, and personal information that is relevant to your identity and credit history. In the past, to get your credit report, you had to request it from one of the three credit bureaus and then wait about ten days for them to mail it to you. These days, you can get your credit report instantaneously and at absolutely no charge simply by enrolling in one of the many online credit reporting services.

Once you have access to your credit report and score, it’s time to do a line by line review to determine what needs to be improved, corrected, disputed and removed. Here are the things you’ll want to study carefully:

  • Personal Information: Review your name, any other names used (maiden name, married name, etc.), addresses (current and previous), date of birth, employment history if listed, etc., to be sure that every detail is accurate. Any deviation and/or information that you don’t recognize could indicate identity theft exists.
  • Accounts & Balances: Review every account listed, checking for the length of time the account has been opened to the current balance amount for accuracy. This includes not only current accounts, but old, even closed accounts.
  • Credit Inquiries: Look carefully at all credit inquiries listed. Did you actually request the inquiry? Do you have multiple inquiries? Remember too many credit inquiries can lower your score, and if you did not request them, it is a strong indicator of identity theft.

After you’ve spent time reviewing your credit report, what happens next? One of the first things that you’ll want to do is to dispute any errors that you happen to find on your report. These errors can range from an old bill still listed as due, but that is paid in full, a late payment ding when you can prove the payment was on time, one or more incorrect addresses, and even multiple accounts that do not belong to you.

The initial dispute can be filed online or via U.S. Mail – just make sure that you file the dispute with all three credit bureaus, and not just one. And make sure that you include all pertinent documentation to support your rationale for disputing the incorrect information. While it takes time and patience to dispute items, 79% of disputes result in the information being removed from the credit report, so it is worthwhile to follow the process all the way through.

This determination and patience is especially important when it comes to cleaning up past blemishes on your credit report – even if you’ve corrected the problem, it can and likely will remain on your credit report for up to 10 years, depending upon the type of blemish it was.

Finally, once you’ve done everything that you can to correct any errors on your credit report, it’s time to figure out what else you can do to raise your credit score. Here, there are typically two areas that you can address:

  • High credit utilization: The balances that you are carrying on your credit cards at any given time may be hurting your credit score if they are more than 30% of your total credit availability. Paying down those balances will typically boost your credit score within 30-60 days.
  • Available credit: If you don’t have any credit available, you may want to consider getting a secured, catalog, or other type of account to establish that availability, and then use it carefully to begin building (or rebuilding) a good payment history.

Remember, cleaning up your credit report can and will take time, but once you identify and start repairing the issues that caused the blemishes, you will find that every little boost in that credit score is just the incentive that you need to keep going!

Don’t Be Rejected for Loans or Credit Cards!

Your credit score could literally kill your deal the next time you’re ready to buy a new home, vehicle, or other big ticket item!  That’s right, a poor (or even a fair) credit score might hurt your chances of getting a loan, or if you’re fortunate enough to be approved for a loan, your interest rate, fees, and even your closing costs could be significantly higher. Your credit score also affects your credit card interest rates, insurance premiums, and even your employability. Why? Put simply, the lower your credit score, the greater the risk that you represent for the lender.

Over time, the additional personal finance charges really add up, especially with your credit cards, as we normally utilize credit cards as revolving accounts, carrying an account balance on them month after month, never quite paying them off before we charge something else to the card. And, with credit cards especially, the length of time that you carry a monthly balance can literally be years! (Don’t believe me?  Look at your next credit card statement…new credit card regulations require this to be on your monthly statement.)

Obviously, the best way to assure that you’ll be able to get your next house, car, or even your next credit card, is to do everything you can to keep your credit score as high as possible. And, if your credit is already fair to poor, you’ll need to do everything you can to improve that score.

How can you improve your credit score?

  • Repay what you owe promptly. Nothing will ruin your credit score faster than failing to repay a debt.   Even a slow or missed payment can have a drastic affect on your score.
  • Know your credit score, and how it is calculated.   Factors such as your total debt load, how close your credit cards are to the credit limit, home ownership, and your employment history can all affect your score.
  • If your total debt load is too high, or your credit cards are all running at their limit, work to pay more than the minimum due each month to bring down your balances, and reduce your debt load.
  • Make sure that the information contained on your credit report is correct.  If your credit report contains outdated or false information, dispute the reports, or have them corrected to at least contain accurate up to date information.
  • Review your credit report regularly and seriously consider having a professional monitor your credit report.  The cost of having a professional monitor your credit report and protect your identity is minimal compared to the cost of correcting and recovering from identity theft.

Even if you’ve already been rejected for a loan, implementing the tips discussed here can and will improve your credit score, and the next time you need credit, the results could be very different!