Among the greatest threats to your financial freedom is a bad credit score. Lenders will deny you loans, employers will be reluctant to employ you, and you will have problems renting homes/apartments because of a bad credit report. That could be devastating. What is more devastating, however, is knowing that it’s your creditors’ or one of the credit bureaus’ fault- not yours- that you are getting turned away. You probably wish that the inaccurate, misleading, and wrongful credit information on your report could just go away. But what if you can remove it yourself? This article gives you an elaborate guide on how to repair credit and get your financial life back in line. Follow it through to know your rights as a borrower.
Request For and Scrutinize Your Credit Report
Maybe you didn’t know this but there is a law- the Fair Credit Reporting Act- that gives you the right to a free copy of your credit report every year. Make sure that you get your reports from the three national credit bureaus (Equifax, Transunion, and Experian) to check for probable errors. You should get reports from all the three companies because even though their data ought to be identical, that’s not always the case.
Which exact discrepancies should you look for in the credit reports? First, check whether or not your personal and account information is accurate. Does your name appear correctly? Can you trace any stray credit account therein? Is any of your closed credit accounts appearing as open? Is there any outdated account information? Your account opening date, is it correct?
After ensuring that everything is in order, go ahead and check any wrongfully entered data. Are there any late payments reflecting on the report that you had paid on time? Are your credit limits correctly captured?
Compile a List of All the Discrepancies and Make a Formal Dispute
The answers to the questions in step one will help you to build a case against the credit bureaus. You have a right under the Fair Credit Billing Act and the Fair Debt Collection Practices Act to contest against, and be exempted from, any inaccurate negative credit records. Note down all the inaccurate, malicious, and misleading information and make a formal dispute to get them removed from your reports.
Whereas it’s possible to make a formal dispute over the phone or online, it’s advisable that you use the regular mail- it’s easier to keep a record of the entire dispute process that way. The letter should be written by you and should be as original and unique as possible- don’t copy the contents of the sample letters you find online but you can use them to learn the tone and format of such a letter.
Accompanying your dispute letter should be copies- not originals- of any documentation that can support your claim. Have one copy of the letter sent to your creditors, one to each of the concerned bureaus, and keep one as proof. Depending on the merit of your case, expect to hear from the bureau in one month’s time. If the creditors and the bureaus cannot disproof your claim against them, your credit history will be updated with the necessary changes effected.
That done, the credit bureaus have to notify everyone to whom your creditworthiness is of concern that your record was inaccurate and that it has been cleaned up.
Fix Your Credit Status
This guide on how to repair credit isn’t complete without a word on how you can fix negative but accurate records on your credit report. There are two main ways through which you can further improve your credit score after removing the questionable data:
- Lower your credit utilization ratio as much as you possibly can. That’s to say that if your debt is for example 90% of your credit limit, try and reduce that percentage to below 20%. You can achieve this in two ways:
- Ask your credit card company to raise your credit limit. If your request is granted, don’t use the new limit to incur more debts as your credit utilization ratio will remain high.
- Pay up your debts.
- Get a credit-builder loan. This is where a bank gives you a loan on paper but doesn’t give you the money. You will then pay for a loan that you technically didn’t receive just to prove that you pay your debts on time. It’s only after paying for the loan to the last penny that you receive the borrowed money. That improves your credit score.
To maximally benefit from this guide on how to repair credit, you will need to be patient, disciplined, and persistent. Patient because the repair process can take you up to six years to finalize, disciplined because you must maintain a responsible credit routine after the repair, and persistent because your creditors won’t correct the wrongful credit information without you pushing them a little bit. That said, credit repair isn’t impossible. Keep trying.