Do you need to improve your credit? Are you getting turned down for credit cards or loans? Are you being offered unfavorable interest rates for financing?
In that case, you might need to use these tools to improve your credit score.
The first thing to keep in mind that improving your credit is a marathon, not a sprint. However, a higher credit score could save you tens of thousands of dollars in the long run.
How to Start Improving Your Credit Score
Your prep work is all about establishing access to your data and shoring up your payment practices.
According to credit scoring service FICO, your payment history makes up a staggering 35% to a FICO Score. So make sure you’re set up to make your payments regularly and on time.
Whatever bills you can put on autopay, do so. For the rest, set up payment reminders. This should prevent future damage to your credit while you go about trying to repair and improve it.
Then, sign up for credit monitoring. This will enable you to watch your credit scores and the effect of your efforts, but also help you catch errors, inaccuracies, or fraud in real-time.
Now, you’re ready to tackle your credit issues with these tips and tools:
Check Your Credit Reports for Inaccuracies
Your first step is to order and review your credit reports. You’re entitled by law to a free copy of your credit reports from the three major credit bureaus: Experian, Equifax, and TransUnion.
You might not think that checking your credit report for inaccuracies is that serious or important, but a study from the Federal Trade Commission found that 20% of consumers had at least one error on at least one of their credit reports.
If you have an undetected inaccuracy on your credit report, your credit score is likely to be negatively affected.
While reviewing your three credit reports, here are some questions to help you catch potential errors:
- Is your personal information correct? This includes your Social Security number, date of birth, full name, and both your current address and formers addresses.
- Are all of your current accounts being reported?
- Do you see any late or missed payments that you remember having made on time?
- Are there any accounts you don’t recognize?
- Do you have negative items from more than 8 years ago still showing?
It’s a good idea to take the “old-school” approach of using a yellow highlighter to carefully mark any potential errors you find. (If you ordered electronic copies, print them.)
Dispute All of Your Potential Errors
If you’ve found accounts, details, or information that appears incorrect, you’ll need to dispute them with the credit bureaus.
This is accomplished by writing dispute letters, which you can send by mail or fax. It’s also possible to file disputes online on the credit bureaus’ websites, but we recommend against this, as you will be required to waive your rights to sue the credit bureaus.
Be sure that you address each probable error you found with each credit bureau on whose report you found it.
We strongly advise against blanket-disputing all of your negative accounts, especially using the same dispute. This is likely to result in a “frivolous” finding by the credit bureaus. And that could actually prevent you from getting real errors removed.
The Different Kinds of Items You Can Dispute
All of the information in your credit report must be 100% correct and fair. This means you can dispute any account or details on it.
Some of the most common accounts you’ll find a need to dispute include:
If there is a collection on your credit reports that you don’t recognize, dispute it. There’s a chance that the collection was reported by mistake.
Also look for duplicate collections, incomplete account information, and misclassified collections.
First, look for late payments that are unfamiliar, or that you know for sure you made on time. You can send in supporting documents proving you made the payment on time.
Also, look for late payment histories that don’t make sense. For instance, some late payments can suddenly start reporting as 60, 90, or 120 days late. Of course, your account would have been 30 days late first, so starting at 60 days or higher indicates an error.
There are other methods for removing late payments, and minimizing their negative effects when you can’t remove them, that you can use.
Old Negative Accounts
Under most circumstances, there should not be any collections, late payments, delinquencies, or chargeoffs that are eight years old or older. Bankruptcies can last 7 – 10 years, depending on the type.
The statutes of limitations vary by state. Be sure to be specific when disputing accounts that should have expired from your credit reports.
So Many More…
There are too many kinds of accounts and negative data to discuss here. In fact, we check over two dozen different data points and account details in every credit account we audit.
If this sounds complicated and time-consuming… It is. That’s why many consumers choose to let credit experts like us take care of it, from our professional credit audit to our advanced dispute tactics.
Look for Areas You Can Improve
Even if your credit report is accurate, you may still have a poor credit score. Your credit scores depend on multiple factors. Each one can have a significant impact on your credit scores.
These factors are in order of most important to least:
- Payment History: If you’ve made multiple late payments, this will have the largest effect on your credit scores.
- Credit Usage: This means your total balances compared to your total available credit (that is, your credit limits).
- Length of Credit History: A longer report with multiple accounts in good standing that are several years old will result in a higher credit score than a short, newer credit report.
- Mix of Account Types: If all you have on your credit report are credit cards, your credit scores will be lower than someone with a wider variety of accounts including loans, a mortgage, etc.
- History of Credit Applications: Aka your credit inquiries. If you have too many inquiries in a short period, it indicates that you might be desperate.
Make a Plan for Improving Your Credit Score
Once you know where your accounts need work, it’s time to start planning how to improve your credit.
There are many strategies to address every area of your credit profile. For example, if you are “maxed out” on one of your credit cards, optimizing your credit balances would be an obvious first step.
You can then start strategically paying down your accounts one at a time, starting with your highest-interest credit card.
Attacking your credit issues and building positive credit is the most effective way to rebuild your credit profile and improve your credit scores.
We can help develop your personalized plan of action with all the steps you can start taking today.
If you’re starting to feel overwhelmed, we understand. No one is born a credit expert.
If you’re lucky enough to have no errors on your credit reports, only positive credit items, and a long credit history, odds are, a few simple steps from this post will help you optimize your credit.
But if you’re not that lucky, you’re likely to find it a huge relief having professional credit experts investigate your credit reports in detail, dispute your potential errors using best practices, and recommend credit building tools and tactics.
That’s exactly what we’re here for! Call or message us today to take the burden off of your shoulders.