How To Clean Up Your Credit: 5 Free & Easy Steps
Whether it’s part of your spring cleaning ritual or preparation for a loan application, the credit clean-up process can be quite helpful. It has the potential to save you a lot of money while also keeping you safe from identity theft and fraud.
Unfortunately, not everyone takes the time to clean up his or her credit. In fact, only about a third of us regularly check our credit reports and scores, according to the National Foundation for Credit Counseling. That leaves the majority vulnerable to credit bureau mistakes and unaware of the various small signs of fraud that can blossom into giant problems if left unaddressed.
Fortunately, it’s pretty easy to keep your credit fresh and clean. And it doesn’t have to cost you a thing, at least if you sign up for a free WalletHub account. WalletHub provides unprecedented access to your credit information and helps guide you to peak financial fitness with customized credit-improvement advice and personalized money-saving offers.
With that being said, we also recommend taking the following steps. Doing so will help anyone transform dirty, scuffed credit into squeaky clean standing.
Put Your Credit Report Under The Microscope: Your credit report is the centerpiece of your financial life. So your efforts to tidy up obviously should begin here. First, look for inaccurate information. It could be the result of a mistake made by a so-called data furnisher — a lender or collection agency, for instance — or a sign of fraud, such as an unrecognized credit inquiry. Or it could prove to be a simple administrative error.
Such issues aren’t always apparent. And that’s why it’s good to go through your report line by line, cross-referencing details against other financial records. In doing so, make sure not to overlook biographical information, such as your name, address(es) and employer(s), either. Discrepancies could be an early indication of identity theft. We also recommend making a list of the potential problems to investigate further as you go.
Finally, if you have a WalletHub account, pay special attention to any credit components for which you are receiving a poor grade, and thus need to improve. You can find this information on your account’s Credit Analysis page.
Dispute All Errors & Derogatory Marks From Authorized Use: If you find any mistakes on your credit report, your next step should be to gather more information. That means contacting whichever lender reported the inaccuracy to the credit bureau(s). If you don’t learn anything that changes your mind, you’ll want to begin the dispute process.
Filing a dispute with each bureau whose credit report lists the inaccuracy will trigger a review of the information. If each bureau concludes that it is indeed a mistake, the information will be removed from your credit report. If the listing was among the few negatives on your report, it could quickly boost your credit score.
Similarly, it’s worth noting that if there’s any negative information in your credit report from an account you were just an authorized user on, you can have it removed. That’s because an authorized user is not legally liable for making payments and thus can’t be held responsible (in a credit report sense) for not doing so. You simply have to ask the card issuer to remove you as an authorized user – if that hasn’t happened already – and then follow the standard dispute process, so the credit bureau can remove the listing from your credit report as well.
Get Current On Delinquencies & Pay Off Collections: The more delinquent a past-due balance, the worse the resulting credit-score damage will be. That’s especially true if the debt is charged off, sold to a collection agency and/or triggers a lawsuit. Until that point, however, making up missed payments may help you stop the bleeding and drag your credit to higher ground.
Paying off any lingering small-dollar collections accounts would be wise, too. The newest credit-scoring models – including VantageScore 3.0 – do not consider paid collections accounts in their calculations.
Add A Personal Statement: You can add a personal statement to your credit report if you are not satisfied with the outcome of a dispute. Simply submit a written request to the credit bureau with a statement of no more than 100 words (200 words if you live in Maine).
Much like a personal statement on a college essay, this gives you the opportunity to explain red flags in your credit history and why such behavior won’t repeat itself. For example, it could be that an illness or family emergency prevented you from making on-time credit card payments. This won’t produce any tangible credit-score gains, but a good personal statement could serve as the cherry on top of your clean-up efforts.
Infuse Your Credit Report With Positive Information: There’s only so much you can do to tidy up the information that’s already on your credit report. So it’s important to start attacking the problem from the outside. What you need is a steady stream of positive information flowing into your credit reports each month, as this will gradually devalue the bad stuff in your files.
The best ways to do that is to open a no-annual-fee credit card and pay the monthly bill on time (and in full whenever possible). Becoming an authorized user on a trustworthy friend’s or family member’s account can help boost your efforts, too.
Finally, it would be wise to monitor your credit standing for a while if you have the luxury of time. This will enable you to evaluate your credit score’s reaction to all of your recent actions and determine how to move forward. And in that respect, we also recommend checking out our guides to building and improving credit.
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