A low credit score has a negative effect on your buying power. Even if you qualify for a new loan or credit card, the interest rates and fees the lender charges are often much higher if a poor credit rating makes you a lending risk. While you cannot always clear away adverse information within your credit file before the reporting period on the data expires, you can take action to clear up certain aspects of your report and, in doing so, improve your credit score.
Correct Credit Errors
The information on your credit report was reported to the credit bureaus by your lenders and creditors. If a lender has inaccurate information, it will make an inaccurate report to the bureaus. Upon reviewing their credit records, some consumers even uncover derogatory accounts that belong to other individuals.
The Fair Credit Reporting Act (FCRA) provides you with the ability to request one free copy of your credit report each year. If you find errors within your report, notify both the information provider and each credit bureau of the errors in order to have them promptly rectified. Correcting inaccurate information -- especially if the information is derogatory -- can boost your credit rating.
Send Goodwill Letters
Missed payment notations within your credit history suggest to future lenders that you are a high lending risk. In addition, missed payments severely damage your credit rating. A goodwill letter is a simple written request to the creditor that it amend the negative notation within your file as a gesture of goodwill. Not all lenders acknowledge goodwill letters. Your chances of successfully clearing away negative information with a goodwill letter increase if the late payment in question was an isolated incident or you have held the account for a long period of time.
Dispute Obsolete Entries
The FCRA notes that each entry on your credit report can only remain for a fixed amount of time. Unfortunately, sometimes damaging records linger on consumer credit reports for longer than the legal time frame. Most negative entries, such as late payments, charge-offs and collection accounts, remain for seven years. Exceptions to this rule include bankruptcies, which report for ten years, and tax liens, which report indefinitely until you pay them off.
If you discover obsolete information within your credit history, you can dispute the obsolete data with the credit bureaus in the same manner that you would dispute incorrect information. The FCRA requires the credit bureaus to remove obsolete entries.
Practice Responsible Habits
Clearing up bad credit is not an overnight process. To truly remedy a damaged credit rating, you must practice responsible debt management skills, pay your creditors on time and keep your outstanding debts as low as possible. Because federal law places limits on how long each item can linger within your credit records, practicing responsible habits ensures that your credit rating will naturally increase over time as evidence of your past mistakes disappear, only to be replaced with positive information.
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