8 DIY Credit Repair Tips
December 19, 2019
A good credit score can be the difference between financial health and financial burden. Whether you’re applying for a loan, looking for an apartment, or buying a new car, taking steps to repair your credit can give you greater peace of mind.
Considering how complex and time-consuming credit repair generally is, many choose to work with credit repair professionals to improve their credit scores. Others choose to tackle it themselves, preferring a more hands-on process.
If that’s your goal, here are eight tips that can get you started on improving your credit profile.
1. Access Your Credit Reports From All Three Bureaus
In order to fix your credit score, you first need to know what information is bringing it down.
Request copies of your credit report from the three major credit bureaus: Experian, TransUnion and Equifax. Some creditors or lenders may not share your information with all three credit bureaus, so requesting all three reports helps you get a full picture of your credit history.
These major credit bureaus are legally required to provide a free credit report once per year under the Fair Credit Reporting Act (FCRA) and you can obtain them at AnnualCreditReport.com. The Federal Trade Commission (FTC) warns that you should be cautious of other “imposter” websites that misspell the AnnualCreditReport.com URL or include “free credit report” in their name in an effort to direct you to a scam website.
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2. Review Each Report
Once you’ve received your reports and read through each one, be on the lookout for errors or particularly damaging items.
Check the following when reviewing your credit reports:
- Accounts that never closed after your request
- Unfamiliar accounts that aren’t yours
- Errors in your personal information
- Accounts that are listed as maxed out
- Payments that are past due
- Accounts that are charged-off or sent to collections
For any delinquent payments and past-due accounts, you’ll need to get in direct contact with your creditors to resolve them through a payment plan to pay the debt or other resolutions. For incorrect information, you’ll need to submit disputes to the credit bureaus.
3. Request to Have Negative Items Removed
The process for disputing unfair, inaccurate or unsubstantiated items depends on the credit bureau. You can usually file your challenge online, over the phone or by mailing a letter. A successful dispute should result in the removal of negative items by the creditor or credit bureau and could help improve your credit score.
You should take the following steps to dispute a negative item:
- Gather documentation that supports your claim.
- Write a dispute letter. It should clearly identify the item(s) you are disputing, state your case and request to have the error removed or corrected.
- Keep copies of your records. If you file online, take screenshots for your records. If you file via mail, be sure to keep your certified mail receipt.
- Wait for the response.
Here is where to submit a dispute with the three credit reporting agencies:
- TransUnion’s dispute page
Mail to: TransUnion LLC
Consumer Dispute Center, PO Box 2000
Chester, PA 19016
- Experian’s dispute page
Mail to: Experian
PO Box 4500
Allen, TX 75013
- Equifax’s dispute page
Mail to: Equifax
PO Box 740256
Atlanta, GA 30374-0256
4. Wait for a Response
Credit bureaus have 30–45 days to investigate your dispute. They forward all relevant data to the data furnisher (creditor, lender or financial institution), who is required to investigate and report back. If the creditor doesn’t respond or isn’t able to verify the accuracy of the data, the bureau may choose to remove the negative information.
The credit bureau must give you the results of the investigation in writing along with the name, address and phone number of the information provider. If the dispute results in a change, you’ll also receive a free credit report.
If the dispute isn’t resolved, you can request that a statement of the dispute be included in your future credit reports. If the item is changed or deleted, the credit bureau cannot add it back to your file unless the data furnisher verifies that it is accurate.
Whether or not your dispute is resolved, you can prevent future negative marks on your credit by improving your credit habits.
5. Pay Bills on Time
The most important thing you can do to maintain good credit is to pay all your bills on time. Your payment history accounts for 35 percent of your credit score. Making late payments will damage your credit.
6. Pay Down Credit Cards
Your credit utilization ratio accounts for 30 percent of your credit score. This is how much money is available to you on your credit cards versus how much of a balance you carry. Lenders like to see low utilization ratios. FICO® recommends keeping your utilization ratio at or under 30 percent.
All you need to do to lower your utilization ratio is pay down the balances on your credit cards. If you pay more than just the minimum payment each month, you can significantly decrease your utilization ratio and boost your credit score.
7. Be Strategic About Applying for New Credit
Applying for a new account prompts a hard inquiry (as opposed to a soft inquiry which won’t affect your credit, like checking your own credit score). Each new inquiry drops your credit score. Applying for new credit accounts for 10 percent of your credit score.
Having one or two inquiries in a short period of time won’t do too much damage. However, you should avoid applying for credit just because it will get you a discount or the interest rate is low. Only apply for credit when you need it.
8. Learn How Negative Items Affect Your Score
Negative items such as late payments, charge-offs, collections or bankruptcies can cause your score to dip. Even a single negative item could cost you 100 points, and items such as a bankruptcy or foreclosure are especially damaging.
Only the passage of time can remove negative items from your credit report. Here are some examples of how long a negative item can impact your credit score:
- A late car payment: Seven years from the first late payment
- Going bankrupt: Seven to ten years
- A foreclosure: Seven years
- Having a debt sent to collections: Seven years from the original delinquency
- Paid tax liens: Seven years
- Unpaid tax liens: Ten years to indefinitely
To stay on top of your credit, always keep an eye out for inaccurate items and work to remove them from your credit reports.
If you don’t have time to do the legwork for yourself, it may be a good idea to get some assistance.
Lexington Law can help your credit repair efforts by helping you to identify errors and challenge those items. Give us a call for a free credit report consultation.