How to do Personal Credit Repair

Credit repair has become an essential part of personal finances in today's world. Knowing the ins and outs of how to improve your credit score can help you get approved for the things you need. Learn how to dispute negative items on your credit report to remove them. Your payment history makes up 35 percent of your credit score and improving it will raise your credit score.

Instructions

1

Order copies of your credit reports from each of the three major credit bureaus: Experian, Equifax and TransUnion. You must have copies of your credit reports to know what is hurting your credit score and what is helping it. You can get a copy from each credit bureau at Annualcreditreport.com, a government-run website. You may also get a copy of your credit reports from any lender that recently pulled your credit.

2

Review your credit reports and go over every item to find out what is hurting you the most. This is most likely a public record like bankruptcy, judgment or tax lien, or it could be a collection, charge off or late payment. All of these will hurt your credit report and need to be removed to repair it.

3

Write a dispute letter to Experian, Equifax and TransUnion disputing or asking for verification on any items that you want investigated. You shouldn't go after all your negative items, because then it would look suspicious and could get your account flagged. Go after about a third of the negative items, usually those that are hurting your credit the most first.

4

Mail your dispute letters to Experian, Equifax and TransUnion. The credit bureaus will have 30 days to verify your accounts with the original creditors or those negative items will be removed from your credit reports. Once the investigation is over, the credit bureaus will each send you an updated credit report showing whether the accounts were verified or deleted.

5

Wait 60 days for each dispute cycle. You will need to continue the dispute process several times to get everything negative removed from your credit reports. This process cannot guarantee an item will be removed; it is all dependent on whether your negative items are verified by the original creditor or not. Negative items are more likely to be removed if they aren't yours or are several years old and paid off. Items that are yours can still be removed, but only if they aren't verified for some reason.

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How Much Does Your Credit Score Go Up for Each Negative Item Removed?

Calculating your credit score takes more than just adding and subtracting numbers for each item in your credit report. The effect of negative items can vary with your overall situation, and so can the effect of removing them. If you rebuild your credit after bankruptcy, for instance, the damage may be gone long before the credit bureaus erase the bankruptcy from their files.

Credit Scoring

Your credit score is based on several elements: Your payment history is most important, but credit bureaus also look at how much you owe, how long your history is, how much new credit you have and what kinds of accounts you use. The damage done by negative information depends on multiple factors. Take payment history, which counts 35 percent of your FICO score: The point loss from a late payment depends on how late it was, how much money is involved, how long ago it happened and how many other defaults you have.

Fixes

The effect of eliminating negative items is also variable. Although bankruptcy will stay on your report for 10 years, you can start repairing the score damage -- possibly 100 points or more -- almost immediately by making timely payments, taking out a low-limit credit card and using it responsibly and keeping your total debts down. When the bankruptcy finally disappears from your report, you may already have made up the damage. In that case, deleting the bankruptcy won't affect your score much.

Considerations

It's impossible to set a definite figure for removing a negative item, the Experian credit bureau states, because the different elements interact. A bankruptcy will take a heavy toll, for instance, but it can wipe out dozens of delinquent debts. Over time, the damage from being consistently delinquent on multiple accounts might be far worse for your score. A five-year-old late payment is a minor blip if the rest of your history is good; if you just got your first credit card, a recent late payment will be much more serious.

Tracking Your Credit

One thing that will boost your score is purging inaccurate negative information from your report. You can use the Annual Credit Report website to obtain one annual free report from each of the major bureaus, Equifax, TransUnion and Experian. If you find errors, you have the right to contact the bureaus and challenge the information. Whatever effect the false negative has on your score should disappear once the item goes.

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How to Fix Credit With the Credit Bureau

Your consumer credit file is one of the most important aspects of your financial life because lenders see this information when deciding whether to offer you a new loan. Approximately 80 percent of consumer credit reports contain mistakes, and 25 percent contain inaccuracies serious enough that the consumer is denied credit. The Fair Credit Reporting Act (FCRA) and Fair Debt Collection Practices Act (FDCPA) give consumers the right to challenge incomplete, inaccurate or misleading information in their credit files.

Instructions

Dispute with the Credit Bureaus

1

Obtain a copy of your credit report from the three credit reporting agencies: Experian, TransUnion and Equifax. Review your reports for any inaccurate, incomplete or misleading account information. This includes any late payments, charge-offs, collections, repossessions, foreclosures, judgments, public records and bankruptcies. Check that all information on every account or "tradeline" listed is correct and note any tradelines that show discrepancies.

2

Type a letter to the credit bureau asking it to "verify" the account information for any tradeline with errors or discrepancies. You can find a examples of verification letters on many consumer credit forums. (See Resources below.)

3

With the letter, include your full name, address, Social Security number and credit file number (if available), as well as two proofs of your current address. Type your signature in italic font instead of signing the letter by hand. Also, do not provide your social security number, copy of your driver license or other identification with correspondence to original creditors or collection agencies. Unscrupulous collection agencies have been known to fabricate or forge account documents using newly provided signatures or personal information if they are unable to produce the originals. If a creditor or collection agency cannot validate your account using the information it has listed on your credit file, it must delete the tradeline.

4

Send the verification letter(s) to the credit bureau via Certified Mail, Return Receipt requested. Keep your postage receipt and the tracking number for each letter.

5

Once the credit bureau receives your letter, you will receive a green return receipt card in the mail from the post office. Mark the receipt date on your calendar.

6

Wait 33 days from the date the credit bureau received your letter. (This allows for the 30 days the credit bureau has to respond to your letter, plus a few extra days for mail time.) If you receive a response from the credit bureau stating that the account information has been updated as requested, or that the tradeline has been deleted, congratulations. You've fixed your own credit.

7

If you receive a response from the credit bureau stating that the account information has been verified as accurate, proceed to the section titled "Dispute with the Original Creditor or Collection Agency."

8

If you do not receive a response within 33 days, send a letter demanding that the credit bureau delete the tradelines because it was unable to verify the information within the time frame dictated by the FCRA.

Dispute with the Original Creditor or Collection Agency

9

Type a letter to the original creditor or collection agency asking it to "validate" the account by providing specific information proving the account is yours and that all information listed on the tradeline is accurate and complete. You can find a examples of validation letters on many consumer credit forums. (See Resources below.)

10

Include your full name and address, as well as the account number listed on the tradeline, with the letter. Type your signature in italic font instead of signing the letter by hand.

11

Send the validation letter(s) to the original creditor or collection agency via Certified Mail, Return Receipt requested. Keep your postage receipt and the tracking number for each letter.

12

Once the original creditor or collection agency receives your letter, you will receive the green return receipt card in the mail from the post office. Mark the receipt date on your calendar.

13

Wait 33 days from the date the original creditor or collection agency received your letter. (This allows for the 30 days the credit bureau has to respond to your letter, plus a few extra days for mail time.) If you receive a response from the original creditor or collection agency stating that the account information has been updated as requested, or that the tradeline has been deleted, congratulations! You've fixed your own credit.

Additional Disputes with the Original Creditor or Collection Agency

14

If you do not receive a response from the original creditor or collection agency within 33 days, prepare another letter to the credit bureau demanding that the tradeline be deleted because the reporting agency failed to validate the account as required by law. Include a copy of your first letter to the credit bureau, the credit bureau's response to you (if any), your letter to the original creditor or collection agency, and your certified mail receipt.

15

On the same date, write a second letter to the original creditor or collection agency demanding that it delete the tradeline because it failed to validate the account as required by law. Include a copy of your first letter to the credit bureau, the credit bureau's response to you (if any), your letter to the original creditor or collection agency, and your certified mail receipt.

16

Repeat Steps 2 to 5 above for your letters to the credit bureau(s) and original creditor or collection agency.

17

If the credit bureaus, original creditors or collection agencies refuse to comply with the law, or are unresponsive, send one more letter requesting compliance with your request. Inform the recipients that you are prepared to pursue all remedies afforded to you under the law, including monetary damages of $1,000 per violation of the FCRA or FDCPA.

18

If the credit bureaus, original creditors or collection agencies still refuse to comply with the law, use the multiple letters, documentation and paper trail you have created to file a lawsuit in federal court for monetary damages under the FCRA and FDCPA.

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How to Find Out if Someone Has Done a Credit Check on Me

A notation is made on your credit report each time your credit is checked. These notations are called "inquiries" and can be viewed by you each time you pull your report. There are two types of credit inquiries. So-called "hard" credit inquiries are initiated by you when you apply for a credit card, mortgage, auto loan or some other type of credit. An excessive number of hard credit inquiries can cause your credit score to drop. "Soft" credit inquiries, which do not affect your credit score, include regular reviews of your credit by your existing creditors, your own requests for your credit report and more.

Instructions

1

Order a copy of your credit report from AnnualCreditReport.com. The site is authorized by the Federal Trade Commission to offer completely free credit reports. Navigate to the site, enter your state, and click on "Request Report" to view and print your credit report. Choose from one of the three nationwide credit bureaus--TransUnion, Experian or Equifax.

2

Search the bottom of your report for a list of hard and soft requests for your credit. Look for the name of the company that you suspect may have checked your credit. The date of the request should be listed alongside the inquiry. Keep in mind that your current creditors generally have the right to check your credit at any time.

3

Contact the company in writing if you did not authorize the inquiry. Lisa Madigan, the Illinois attorney general, says the credit bureaus will not investigate inquiries and you must contact the creditor directly. If applicable, tell the creditor that you did not authorize your credit to be checked and that the company should remove the inquiry from your credit report. Madigan says the credit bureau will remove the inquiry if asked by the creditor.

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How to Clear Negative Credit History

If you have a negative credit history, it can prevent you from getting loans or increase the interest rate that you must pay when you do get a loan. Unfortunately, unless there are mistakes on your credit report, there are no easy ways to clear negative credit history quickly. However, you can, over time, create a more positive credit report, which will put you in a better position. This requires patience and determination, because you may have to make due with less.

Instructions

1

Correct mistakes on your credit report. Look over your credit report for any negative marks that are incorrect. For example, your report may show an open, unpaid account when you've actually paid the balance and closed the account. Send the credit bureau a letter by certified mail disputing these mistakes, providing any proof that you may have, such as a canceled check. The bureau must respond within 30 days.

2

Pay your bills by the due date. Your lenders don't care whether you pay more than the minimum balance. In fact, they prefer that you didn't, because they can then charge you more in interest. What they do care about is whether they receive your payment by the due date. If they don't, they'll report it to the credit bureaus, giving you a negative mark.

3

Ask your creditors to remove negative remarks. In some cases, a company will remove negative things about your account simply by asking. For example, if you are generally a good customer but had a few late payments, the company may reverse those for you.

4

Wait. If you have many legitimate negative marks on your credit report, there is little that you can do to remove them except for waiting. These marks will go off your report after seven years.

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How to Clear Your Credit Report

Every person who has applied for and used credit has a credit report. Credit identification is based on several pieces of information, including social security number, date of birth and employment information. Credit scores are based on credit accounts (credit cards, loans), credit inquiries and collection items (overdue debts). Many credit scoring agencies score these in slightly different ways, which is why the score may differ across companies. Credit reports can often seem confusing and difficult to change; however, there are ways to not only improve, but basically clear your credit report.

Instructions

Improve Your Credit Score

1

Improve money management. Simply clearing your current credit score will not prevent credit problems in the future. Learning to manage money--which includes not purchasing frivolously or buying items on credit that may be difficult to pay back--can drastically help solve future credit issues.

2

Get a copy of your credit report. Several companies offer free credit reports. These are necessary to examine your current credit report and decide whether your score needs to be improved. This also gives you a chance to search for possible credit errors. Credit errors might occur if faulty information gets sent to the credit bureau or if credit information is entered under the wrong social security number.

3

Dispute credit errors. If you find a credit error, contact the credit reporting agency directly. Find any information that you have supporting your error claim and send the agency a detailed letter with your contact information and your dispute. You should also contact the source of the error. For instance, if a mortgage company reported a delinquent payment, find out why.

4

Lower your debt-to-income ratio. Credit scores decrease when a person owes a large amount of debt relative to her income. Credit scores also decrease when people borrow more than half of the money available on their credit line. Paying down some of these debts will increase your credit score.

5

Consider a credit cleaning company. Technically speaking, no company can instantly wipe clean blemishes on your credit. However, some companies offer services to assist you in credit cleanup. They may look over your credit report and advise you on how to increase your score. They may also assist in having credit errors removed from your credit report. However, be aware than many services offer credit clearing for a fee, but then do not actually help clean up your credit. Do your research before considering any credit assistance company.

6

Be patient. Having credit errors removed or simply improving bad credit can be a long process. In some instances, it can take years. Simply focus on lowering your debt, making payments on time and avoiding credit scams to keep the process moving.

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How to Restore Your Credit Easily

Your credit score is all that matters to many businesses and financial institutions. It details your financial responsibility and history, dating back as far as you've had credit. Any time you make late payments or default on money owed, the institution reports it and your credit score drops. Even if you have a low or unsatisfactory credit score, there are things you can do to restore your credit and get back on track without filing for bankruptcy.

Instructions

1

Check your credit score for accuracy. Looking at your own credit score does not lower your score. Review the history and dispute any charges with the credit bureau. You can obtain a free credit report once a year from annualcreditreport.com (see Resources).

2

Pay down credit card debt quickly and continue paying on time. Develop a plan to pay off credit cards rather than simply making minimum payments. Simply because you have a $5,000 credit limit does not mean you should owe that amount. The more of your credit you use, the lower your credit score.

3

Use credit cards sparingly and use them to your advantage. The longer you have had a credit card, the better it looks on your credit report. Maintain old accounts and use them on occasion.

4

Pay your debt; don't move it around. Constantly transferring balances or refinancing property can save you money in the short term, but this is called revolving debt and shows up in your credit report.

5

Request "goodwill" reports from credit card companies if you have a long history. Sometimes credit card companies will remove or refrain from reporting late payments if you write or call them requesting a goodwill gesture.

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