If your scores and credit standing are not where you want them to be, don’t worry —you can change them. While it is not possible to remove accurate negative information before the time it drops off the report, you can make improvements by using credit responsibly from this point forward.
Kick-start a positive credit rating
- Always make timely payments. A commitment to never make a credit payment late is one of the most powerful steps you can take to improve your credit rating.
- Repay collection accounts. If you have any accounts in collections, you can give your score a quick boost by paying them.
- Limit open accounts. Two to four open credit accounts is usually perceived as a good number to have. It is important to strike a balance. Too much available credit can make you appear risky to a lender, since you have the ability to run up high debt —yet not enough shows lack of capacity, which can also appear risky.
- Keep old accounts active. Accounts that you’ve held for two years or more show credit history, which indicates stability.
- Don’t “max out” accounts. Keep your balances no more than 60 percent of the limit on revolving credit.
- Transfer balances sensibly. While transferring balances to “teaser rate” cards can be a way to efficiently get out of debt, too many can have a negative effect on your score. The accounts will be new, and likely have balances close to the limit in order to maximize the advantage of the low rate.
- Avoid excess credit applications. Each time you apply for credit, your score decreases just a bit, so only seek loans and credit you truly need.
Establish or Reestablish Credit
Whether you have no credit history because you’ve never had credit, or your score is low because of past problems, you can establish or reestablish credit by:
- Obtain a secured credit card. Many financial institutions will issue you a credit card if you put a specified dollar amount on deposit with them. The funds are held as security, and a line of credit equal to the amount you have on deposit will be issued to you. If you make payments as agreed for approximately one year, the creditor may release the security funds and grant you an unsecured card.
- Ask someone with good credit to cosign. Another option is to have a friend or family member who has a good credit history cosign on a loan or credit card for you. Be especially careful with these arrangements —any late payments you make will not only reflect poorly on your credit report, but your cosigner’s as well. After six months to a year, reapply for credit on your own.
Correct Inaccurate Information
Many credit reports contain mistakes. Causes of credit report inaccuracies include incorrect identity (information on someone else’s account showing up on your report because you share a similar name), old information not being dropped from the report on time, or, more seriously, identity theft or fraud. If there is inaccurate information on your report, you can correct it:
- Dispute the information with the credit bureau. Using the “request for investigation” form provided with the report (or in a letter if you don’t have the form), indicate which information is incorrect, and explain what the true information is. Enclose any supporting documents you may have. If you received the report online, you may use the dispute process on the bureau’s website. Whichever process you use, the credit bureau must investigate your claim, usually within 30 days. If an item is deleted or a dispute statement is filed, you may ask that anyone who has recently received your report be notified of the change.
- Dispute the information with the creditor. If the investigation results in no change to your report and you believe the information is still inaccurate, contact the creditor directly and request documentation of the debt. If they can’t provide it, let the credit bureau know —only verifiable debts can be reported. Remember to document everything as you file your dispute. Keep copies of letters, mark your calendar, and get the names of everyone you talk to. Also, send the letters certified mail, return receipt requested, so you can be sure it was received.
- Add a statement to your report. If the investigation and your efforts still do not resolve the dispute, you may add a statement to your file (in 100 words or fewer) explaining your side of the story. Your statement will be included with future reports for as long as seven years. If you want to remove it before it automatically drops off, send a written request.
Beware Credit Repair
There is no such thing as a quick credit fix —only time and positive activity will mend credit damage.
Some companies claim to “repair” credit reports, and often for a very high fee. They frequently operate by flooding the credit bureaus with letters that dispute negative, but accurate, information. If the credit bureau is unable to investigate the claim within 30 days, the information is removed. This rarely works though. The credit bureaus are generally able to respond in time, and even if the information is removed due to a backlog of requests, it will simply be re-reported by the creditor later.
Another common tactic credit repair agencies use is to issue consumers a “new identity,” complete with a tax identification number to use as a social security number. This is an illegal practice for which the consumer often ends up paying the legal price. There is no legal way to remove accurate and timely information from your credit report.