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Five Ways to Clean Up That Credit Score—And Fast

  • Feb 6 2013

Despite previous issues with finances that negatively affected your credit, you may now be in the position—and proper mindset—to start cleaning up that credit report. The proper mindset is important as this exercise does require effort, and most likely some level of motivation to get you going in the process. Perhaps you want to buy a new house or a new car, but need a better credit score for interest rates, and perhaps even to be approved. To see more rapid success with improving your credit report, try the following steps:

  1. Get a grip on your scores—all of them. This means pulling reports from all three major credit reporting agencies (AnnualCreditReport is a great resource for doing this all at once) and examining all the information therein. Don’t be surprised if you find more than one error here. And while it may be a headache to spend a few hours going through this information and then endeavoring to reverse what’s wrong, you may find it’s easier than expected. As you report any errors, you can put some of the responsibility on the credit reporting agency to investigate the issue, contact the creditor, and hopefully fix it quickly, within 30 days. Be sure to contact the creditor yourself though also in regards to the erroneous information. Supporting documentation should also be sent to both the credit reporting agency and the creditor. Once the error has been resolved, you may receive another free credit report reflecting the changes.
  2. Consider writing several letters of explanation to be attached to your credit report. If you have had a major strike against your credit like a bankruptcy, for example, it can sometimes be helpful to enter a short, honest letter that explains the financial hardship you were going through at the time. Here you will need to show that you take responsibility for the issue and that your situation is different now. Offering any relevant documentation is recommended to demonstrate what happened with a specific issue such as foreclosure or bankruptcy. The key is to show that you are now once again a good risk financially, and what happened in the past will not impact your future as a borrower.
  3. Change your paying—and spending—habits. Where before you may have not been as been as motivated to make payments on time, this is your chance to show that you are serious about your finances and things have changed. Construct a plan to see that you can make all monthly payments on time, whether that is for credit cards, the car, house, or other debt—and do so. It often helps to put your budget down on paper and set up monthly reminders if you aren’t already using automatic payment systems. Overspending on credit cards is obviously something you want to avoid now for good, along with taking out any new credit cards or opening any other new accounts.
  4. Start paying down balances. You may want to consider using other funds that have been set aside to do this or even take out a personal loan that would offer a much lower interest rate. While raising your score is priority, so is the underlying premise of getting back into better financial shape—and staying there. Begin settling payments that are behind or in collections. Along with this, figure out which payments are late but aren’t already in collections, and pay them off in entirety.
  5. Avoid revolving credit, and keep your credit utilization low, below 30 percent if possible. Keeping accounts open but balances low is a good idea for improving your credit. It’s also good to show accounts paid off in positive standing on your report for as long as possible. You may have paid off a large item, but it can be very helpful for that to show on your credit report. It is important to get rid of as many of those small and revolving credit card balances as possible if you have a handful of them hanging on with revolving debt. Having borrowing power available looks good on your report, but too many small credit cards with revolving balances will work against you.

While many of us have experienced financial challenges and dings to the credit report—some small and some large—you should begin to see progress as soon as you beginning working on the above steps. The key is stick with your plan each month and remember that you are working not only toward greater financial health but also the reward of being able to invest in larger purchases such as a home or car, paying a desirable interest rate.

If you currently have credit card debt that is of concern or if your finances need an overhaul, an experienced attorney from Fitzgerald & Campbell, APLC can review your case and discuss all the available options with you. Our attorneys have decades of experience in serving clients as they navigate through challenging financial situations, to include bankruptcy and other debt management processes. Let us review your case and discuss what would work best for you. We are here to help!

Posted in: Credit Report