If you fix your credit report by removing errors, optimizing credit and paying on-time you'll quickly build your credit score to its former glory. Taking steps to improve your credit rating will not only increase your chance of getting acceptance, it will improve the borrowing terms on credit cards, mortgages and loans. The eligibility criteria for almost all financial products have been considerably tightened in recent years.
Request a Free Credit Report, Correct Mistakes and Build Your Credit Score
According to the Nilson Report, credit reference agencies - Experian, Equifax and TransUnion - manage 202 million credit files. Research by US PIRG revealed that 25% of them contained one or more serious errors and 79% contained some bad data. The chances are that your report will have some a problem.
When lenders perform a credit search, they cannot tell the difference between bad data and bad credit. If the problem isn't resolved, it could lead to credit rejection. The Fair Credit Reporting Act (FCRA) gives that individual the right to correct credit report errors personally or through a professional attorney.
The Fair and Accurate Credit Transactions Act entitles every American citizen to a free copy of their credit report from annualcreditreport.com once every 12-months. It is important to check the information held by all three agencies as each set of data is totally separate and unique.
Fix Your Credit Report By Removing Common Errors and Mistakes
- Negative entries that should have fallen off your report. With the exception of chapter 7 bankruptcy (10-years), a default or delinquent account should no longer show after 7 years.
- Credit searches and applications for financial products that you never made. Too many searches are a big negative, but identification theft is a far greater concern.
- The name and social security number aren't yours or don't match.
- An account that is listed as 'paid derogatory', 'settled' or 'paid charge-off' when it should show as 'current' or 'paid as agreed'.
- Limits on credit and store cards that are reported as lower than they actually are.
The current law permits you to dispute the accuracy of any information held directly with the financial institution rather than the credit reference agency. Although it's always been the case that investigations are carried out within 30 days, this change has made cleaning up your credit report a lot quicker. Always provide a copy (not the original) of any supporting documentation when lodging a dispute.
Redistribute Credit Across Several Cards to Fix Your Credit Report
Regardless of whether the debt is settled punctually, maxing-out a credit card will result in a lower credit score. This is because it means that a higher percentage of your total credit limit has been used which affects your credit utilization figures. Avoid using more than 30% of your limit in any one month. Repairing your credit can be achieved more quickly by keeping this figure below 10%.
Shutting down old credit accounts doesn't boost your credit score, it actually leads to a credit score drop. Rather than closing down an unused credit or store card, consider using it occasionally and paying off the full balance at month end. Closing down the account reduces your maximum credit limit. Provided that you stick to the 10% to 30% guideline alluded to above, this will help to improve your credit rating.
Build Your Credit Score By Paying Debts Punctually
When seeking to rebuild your credit, there is no substitute for paying your debts on-time. Settle outside of the defined grace period and this information will be recorded by credit reference agencies for up to 7 years. Fix your credit report by making punctual payments towards a form of revolving and installment debt. If you don't have an active charge card (revolving debt), consider signing-up for a secured credit card as this will help to improve your credit rating far more quickly.
Sources
"Building a better credit report." Federal Trade Commission (FTC).
"Credit reports and score statistics." Credit.com.
" Consumers get new path to dispute credit report errors." CreditCards.com.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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