Your credit score has a huge impact on your overall financial well-being. A good score will help you to buy a new car, purchase your first home, or just take a relaxing vacation overseas. Without a good credit score, you will be saddled with high interest rates or unable to obtain any credit at all.
What’s worse, your poor credit may not even be your fault. According to a recent FTC study of the credit reporting industry, five percent of consumers had errors on one of their three major credit reports that was so severe that it could lead to paying higher interest rates on loans and higher premiums for insurance.
This may seem like a low number, but consider this: around 20 percent of consumers who identified errors on one of their three major credit reports increased their scores so much that they moved into a lower risk tier, meaning they were able to qualify for lower interest rates.
How many consumers haven’t checked their reports to identify errors? And how much more could they be saving if they did?
Thankfully there are legal, ethical ways to improve your credit report and score which will let you secure the best rates possible.
Step 1: Get a free credit report from TransUnion, Equifax and Experian
The first step towards improving all three of your credit scores is to order a copy of each report and review it for errors. A free credit report is available on a yearly basis to every citizen of the US. Some states offer an additional free credit report. If you’ve been denied credit or employment due to your credit file, you can also receive a free credit history report even if you’ve already gotten a free report in the same year.
Step 2: Check for Accuracy
Once the report is in hand, read through it and make sure all of the listed information is correct. Many components go into factoring your FICO score, and eliminating just one bit of wrong or negative information can cause your score to dramatically improve and increase your chances of qualifying for credit.
Your Credit Report Accuracy Checklist
- Incorrect amounts owed: If the amount owed is listed incorrectly, the report won’t accurately reflect your utilization or the amount of credit used. High utilization can negatively impact your credit scores.
- Accounts that belong to someone else: If you have no recollection of a debt, it may not even be yours. Any unknown debt should be disputed.
- Incorrect delinquencies: Items may list as being paid late, even if they were paid on time. Late payments damage your credit score and should be disputed.
- Inaccurate reporting of collections accounts: Collection companies are notorious for putting information on a credit report simply to extort money from unwary consumers. If the information is incorrect, it should be disputed.
- Duplicated collections accounts: An account or debt should only be listed once. If it is listed multiple times by the same organization or by competing organizations, all but one listing should be removed.
- Incorrect judgment information: If a judgment has been incorrectly listed, it should be disputed; judgments can hurt a credit score or impact your ability to secure a loan. Any inaccurate information about the judgment can be disputed, even if “most” of the information is correct.
Step 3: Disputing Inaccuracies
Once errors have been identified, they will need to be successfully disputed. As long as a negative item remains on the report, it will drag down your score. Therefore, the best way to improve your credit scores is to remove as many of these errors as possible. You can do this by disputing incorrect negative information with the credit bureaus.
When a consumer seeks to dispute an item on their credit report, the business or entity who listed the item is required to prove that it is accurate. For collection accounts, a collection agency will have to provide validation or proof of the debt within 30 days of the request, or remove the item.
For best results, validation requests should be sent in writing, with proof of delivery.
If the company is unable to prove the debt, they are required to remove it. If they do not, the debt should be disputed with the credit reporting agency. A dispute can be sent in the form of a letter or online, and requires the reporting agency to confirm the debt or remove it. Once negative information is removed, your credit scores should see an increase.
Another Option: Reputable Credit Repair Services
Repairing your credit and improving your FICO score can be a lengthy process, but credit repair companies take away most of the work. In many instances, the only thing you’ll need to do is order a copy of your reports, and make a note of any inaccuracies that you want disputed.
The credit repair companies do all the hard work of keeping up with validation letters, dispute notices, and all the deadlines involved.
The money you spend on credit repair is an investment in your financial future and well-being. If you need recommendations for professional credit repair companies you can trust, check out our reviews section for more information.