What Is the Best Way to Repair a Credit Report?

Credit reports are important to nearly everyone, regardless of financial situation. Obtaining auto loans, financing a home or paying for a college education can require a positive credit report. Many other items, such as auto insurance rates, utility deposits and job searches, can be affected by a negative credit report, resulting in higher payments or lost employment opportunities. Consumers have the ability to correct or repair negative information on their credit report by various means.

Evaluate Your Credit Report

As dictated by the Free File Disclosure Rule of the Fair and Accurate Credit Transactions Act (FACT Act), consumers are entitled to a free copy of their credit report every 12 months, upon request. Each of the major reporting entities, Equifax, Experian and TransUnion, is covered by this act. Review a current copy of your credit report to analyze details and identify possible errors or items that need to be updated.

Correct Errors

Correcting errors, missing or outdated information in your credit report can help improve your overall credit score. Common items to be reviewed should include current address, employer and historical information. Correcting this type of information is not usually difficult, because it comes directly from the consumer. Resolving errors involving incorrect late payments, credit balances, errant accounts or other issues must be submitted to the credit reporting agency in writing. By law, the agency must investigate the claim, make appropriate adjustments and provide you with an updated copy of your report when completed. In most cases, this process must be completed within 30 days.

Improve Relationships

For valid accounts with negative information, consider communicating with the creditor to inquire about possible resolutions that may help improve your score. In some cases, the creditor may be willing to rework your debt, delay payments, erase late payment records or allow you an extension on the debt. Communicating with debtors shows a willingness to work out an equitable resolution and can help improve relations. Corrections to your credit report that are originated by the creditor don't require any investigation or waiting period on the part of the credit reporting agency.

Eliminate Debt

One of the most basic factors in determining a credit score is your debt-to-income ratio. In simple terms, this is a determination of how much money you make, how much you owe and how much you can afford to make the payments. If your debt payments require most of your income, your score will fall. Paying off debt will improve your ratio and positively affect your score. Converting credit card debt to long-term, low-interest debt can reduce monthly expenses and help your score.

Build New Accounts

In the event of bankruptcy or other negative event, your credit report may only contain older, terminated accounts. Negative credit reports with no active, current accounts will be difficult to improve. While you may not qualify for a major credit card, consider a department store card, local furniture store financing or on-site auto financing. These accounts can show up on your report as new credit and help improve your overall average. Before establishing any new account, ask the creditor if they report your account to any of the major reporting agencies.

Be Patient

Don't expect an immediate change in your credit report, as many items will take time to correct or improve. Improving your score will occur slowly as you make current payments and build new credit. By law, negative items such as late payments and bankruptcy can only be included for a limited time.