Understanding how your credit is calculated is the first step to cleaning up your credit history and improving your credit scores. The FICO scoring system considers several key aspects of your credit file to come up with the number that the creditors use.
Because all three credit bureaus have their own relationships with creditors who report your payment history, it is quite likely that your credit score will vary among Equifax, Experian, and TransUnion.
This also means that any negative information that is on one credit report may or may not be on the other two. That’s why some lenders may approve you for a loan when they pull your credit report versus another lender who denies you elsewhere. They could be using different information pertaining to your credit history.
What items can damage your credit score?
There are three areas where your credit scores may be impacted, outside of major negatives such as bankruptcies, foreclosures, and judgments. These common damaging items include:
- Collection Accounts
- Charge Off Accounts
As you can see by the charts below, there is wide room for improvement by getting inaccurate and negative information on your credit report removed.
How to Start Cleaning Up Your Credit
Each type of negative item comes with different nuances for getting them removed from your credit report. But before you even start that process, you have to prepare your case effectively.
Follow these steps to get started so that you can successfully clean up your credit regardless of the type of items causing damage. Thorough preparation is the best way to set yourself up for a quick dispute process free of headaches.
We’ll show you how to clean up your credit so you can increase your FICO score. That way, you can start getting better access to credit cards, loans, mortgages, and other types of financing you may need.
Order and Review Your Credit Reports
The Fair Credit Reporting Act (FCRA) allows you to get a free credit report from each of the three major credit bureaus every 12 months at AnnualCreditReport.com. It’s important to check all three of your credit reports regularly to know exactly what items are potentially damaging your credit score. The first step to cleaning up your credit is to go through each section and look for any potential red flags, including:
- Inaccurate personal information, such as your name or social security number
- Accounts that don’t actually belong to you
- Unauthorized credit inquiries
- Inaccurate account details, such as amounts owed or credit limits
- Missing information, such as closed accounts being listed as open
- Outdated, negative information still listed after the seven- or ten-year limit
Determine Which Accounts to Dispute and Gather Evidence
Any error on your credit reports can be disputed, especially if it’s hurting your credit score. Go through each of your credit reports and mark which ones you want to challenge. If you’ve been a victim of identity theft and don’t recognize the accounts, or even if you see anything that is questionable, you have the right to dispute it.
If you have a lot, you might want to narrow things down in one of two ways. The first method is to only dispute a few at a time. If you choose to do this, start with the most damaging items first.
Hire a Professional Company
The second method to clean up your credit report is to contact a reputable credit repair company like Sky Blue Credit Repair. They file a dispute for you, which can be especially beneficial if you feel overwhelmed or unsure of the process.
Once you decide which items to include in your dispute letter, you need to gather any evidence you wish to use to support your case. However, this step is optional. You don’t need to include it in your dispute request because the burden of proof remains with the credit bureaus.
It’s their job to verify each item with the relevant creditor, and if they can’t do that, they must remove the item from your credit report. But if the creditor supplies faulty information, it’s smart to have your own paperwork on hand to support your case.
Keep these documents ready to have when you need them. For example, when working with a credit repair service, they might also request this information from you to bolster your case during the process.
If you’ve been 30 days or more past due with your bills, you may find delinquencies listed on your credit report. While these delinquencies are definitely damaging, they can sometimes be easy to fix.
Start with the late payments that are the most past-due, i.e., the 90-day and 120-day debts. The reason to start here is that these are the most damaging accounts to your credit scores. They are also the accounts that are most likely to be sent to collections or charged off.
If you can make a payment that will bring you current, you should call your creditor and be prepared to negotiate. If these delinquencies are for an account that is currently open, you have some leeway here.
Updating Late Payments
Ask the creditor if they are willing to update the account as being paid on time rather than showing a history of past-due payments.
For the 30-day and 60-day accounts, if you have any paperwork showing you made or mailed the payment within that 30-day window, you should call the creditor and dispute the derogatory listing.
Often, creditors are willing to work with a good customer who is rarely late with payments. Otherwise, you will have to send your dispute in writing to the credit reporting agencies and your creditor to get the inaccurate information updated.
Debt that has been charged off means that the creditor has declared it unlikely that you’ll ever repay the debt. They still have the right to attempt to collect the money that is owed.
However, in most instances, they’ll sell it for pennies on the dollar to a collection agency to begin their own collection process. When it comes to your credit score, charged off debt has a greater negative impact than a late payment.
Creditors don’t like to see debts that haven’t been repaid and are much less likely to extend credit to you while charge offs are on your credit report because it essentially looks like abandoned debt.
How to Remove Charge Offs from Your Credit Report
Some loans, such as mortgages, require that all charged-off debt be settled or paid off before you can qualify, no matter what your credit score happens to be. Removing a charge off from your credit reports will take more work, but it is possible.
You will need to:
- Contact the creditor and ask if they are willing to settle – this can be done by phone or by letter, but the most effective way to have proof of the settlement is to get everything in writing.
- Make the payment in certified funds – so you have proof the debt is paid.
- File a dispute with the credit reporting agency and use your proof of payment to support having the disputed charge-off removed.
Sometimes you’ll luck out, and a creditor that has been paid won’t bother to respond to the dispute because they have payment in hand. This will get the item deleted from your credit report entirely.
Other times, the creditor will update your account to say ‘Settled,’ which is still better than having an unsettled charge-off on your credit report. However, it won’t help your scores as much as a deletion would.
Collection accounts are usually the most complicated issue on anyone’s credit report. Unfortunately, collection accounts are usually sold to debt collection agencies – sometimes multiple times.
The collection agencies have zero interest in helping you. They only care about being paid as much as possible.
How to Remove Collections from Your Credit Report
However, there are some bright spots when it comes to removing collections from your credit report:
- If the debt is past the reporting limit (generally more than 7 years old) then the collection agency cannot list it, and you can dispute the information to have it removed.
- If the collection agency has reported the wrong date, the wrong amount, or other erroneous information, you can dispute that as well and have the negative listing deleted.
- You have 30 days to request validation from the time the creditor first contacts you. In this time, they cannot perform any collection activities and they cannot add the debt to your credit report while the investigation is ongoing.
For older debts, especially, collection agencies are often unable to provide accurate information that proves they own the debt and that you owe it. So more often than not, it pays to dispute any inaccurate information.
Understanding these basics to clean up your credit will put you on the right path, but it’s only the first step. The sooner you get actually get started repairing your credit, the better off you’ll be, both financially and emotionally, in the future.
What to Do After You File a Dispute
Once your dispute is removed, there are a couple of steps you can take to continue cleaning up your credit.
First, ask the credit bureau to send notification of the change to any financial institution that has accessed your credit report in the last six months. They can do the same for any potential employer that has viewed your credit report over the last two years.
Just note that these actions don’t happen automatically. You have to make the request in writing to each applicable credit bureau. But it’s a worthwhile trick to implement if you’ve been trying to get credit recently or if you’ve been applying for a new job requiring a credit check.
What to Do If They Won’t Remove It
In the event your request for removal is denied, there are a few more methods to try. First, you can always wait for the negative item to drop off naturally.
Most stay on your credit report for seven years and actually stop hurting your credit score after the first few years lapse. If you’re close to that drop-off mark, it may be worth just exercising a little patience.
If you’ve tried to clean up your credit on your own, consider hiring a professional. Depending on how much your bad credit is costing you in high interest rates or lack of credit altogether, the fee for a professional credit repair service could likely be worth it.
How can you clean up your credit report fast?
Cleaning up your credit certainly takes some time. But once you’ve initiated the dispute process on your inaccurate negative items, there are other things you can do to repair your credit quickly. They are as follows:
- Reduce or eliminate your revolving debt, particularly from high-interest credit cards.
- Consider a debt consolidation loan or balance transfer credit card. Paying down credit card balances as quickly as possible will help you lower credit utilization ratio.
- Ask for a credit limit increase. This can also help to lower your credit utilization.
- Consider getting a secured credit card. Secured credit cards require a security deposit which will also act as your credit limit. These credit cards allow you to build credit when no one else will give you a credit card. You can often upgrade to a better credit card once you’ve proven yourself to the credit card issuer.