There's no shortage of people who say they can clean up bad credit, but
if you're smart, you'll be wary. The steps to improve your credit are simple
and no tricks or "secrets" are necessary.
Your Fair Credit Reporting Act Rights
The Fair Credit Reporting Act gives you the right to make sure the information
in your credit report is accurate. If you need to clean up bad credit, your
first step should be to make sure your credit report is accurate. Each
of the consumer reporting agencies, commonly called credit bureaus, maintain
their own versions of your credit file. So the credit report you get from each
may be different.
Getting Your Credit Report
To get your credit report and credit score(number rating your credit), contact
one or more of the three major credit bureaus:
Equifax 800-685-1111
Experian 888-397-3742
TransUnion 800-888-4213
Once you get your credit report, check it for errors. Also be sure to check
the record of credit inquiries. If there are any inquiry sources you're not
familiar with, it many be a sign of identity theft. If someone has your Social
Security number or a credit card number, they could try to get credit in your
name.
Correcting Your Credit Report
If there's an error on your report, you need to write the agency who created
the report. If a creditor is involved in the error, then you need to contact
the creditor too. Include in your letter copies of documents relating to the
disputed item. Explain exactly what you believe the correct information should
be and why the current item is wrong. It's a good idea to send your letter by
certified mail with return receipt requested.
The credit bureau must investigate your dispute within 30 days and either
verify the contested information or correct or remove it. After the
investigation is completed, the credit agency must write you with the results.
If a correction is made, the other reporting agencies must be notified of the
change. And if you request it, the report agency must notify anyone of the
correction if they received your credit report in the last 6 months or 2 years
if it was an employer.
If the information isn't changed to your satisfaction, you can have a
short statement inserted in your report giving your position. The FCRA allows
the reporting agency to limit the statement to no more than 100 words.
Negative Credit Items
If negative credit information is correct, the only legitimate way to clean up
your credit is to wait. Most negative items are automatically removed after
7 years and bankruptcies after 10 years. Items which have no set time limit
include:
- Credit information from a job application for a position with a salary
of more than $75,000.
- Credit information from an application for more than $150,000 of credit
or life insurance.
- Criminal conviction information.
- Lawsuit and judgment information is reported for 7 years or the length
of statute limitations, whichever is longer.
If You Want to Do More
After any errors are corrected, prompt bill payments will gradually clean
up bad credit. But if you want to further improve your credit, consider
adding any credit accounts that aren't being recorded. If you have a good
open account that doesn't show up in your credit file, ask the creditor to
report it to the reporting agency.