Simple Steps to Improving Your Credit Report

When you apply for any loan, the lender will look at your credit report. In addition, landlords and even some employers check your credit prior to doing business with you. There are important steps you can take to improve your credit report and credit score.

Know Your Report

The first step to improving your credit is to familiarize yourself with the information contained in your credit report. In 2003, Congress passed the Fair and Accurate Credit Transactions Act. Under the law, consumers can receive one free report each year from all three main bureaus: Experian, Equifax and TransUnion. You can order the free reports online at the Annual Credit Report website. This site will also tell you how to order the reports by mail or phone, if you prefer.

Dispute Errors

Your credit score is based upon the data found in your credit report and as such, errors can lower your score. Under the Fair Credit Reporting Act, consumers have the right to dispute errors and inaccuracies with the credit bureaus. Once you file a dispute, the bureau has up to 30 days to investigate your dispute and then make changes. The FCRA requires the bureau to send you written notification of the results.

Pay Bills On Time

Lenders report your payment history to the bureaus and it will appear on your credit report. The largest contributor to your FICO credit score is how well you pay your bills, which accounts for 35 percent of the score. Late payments will drop your score. According to Bankrate.com, one single 30-day late payment can drop your score by 60 to 110 points. The later the payment, the more damage occurs. To improve your score, make all credit payments on time.

Pay Down Debt

The amount of debt you have represents the second-largest contributing factor to your FICO credit score at 30 percent. Your credit report lists the accounts you have and the corresponding amount of debt for each one. FICO looks at your credit utilization ratio, which measures the amount of available credit you have versus the amount of credit you're using. The higher your amount of available credit, the lower this ratio and the higher your score. Conversely, the less available credit you have, the higher this ratio and the lower your score. To improve your score, reduce the amount of debt you have and keep credit balances low.