How to Erase a Credit Score

Managing your credit and improving your credit scores can seem like a daunting task. While you cannot erase bad credit scores overnight, you can take immediate steps to improve your credit scores over the long term and eliminate negative marks that hurt your chances to get approved for additional credit.

Instructions

Check Your Credit for Inaccuracies

1

Obtain a copy of your credit reports from the three major credit bureaus--Equifax, Experian and TransUnion. You can do this once a year, for free, by mailing a request to each agency.

2

Check each report for inaccurate accounts, including payments incorrectly reported as late. Compare each report because the credit bureaus may have varying statuses for your accounts.

3

If you discover any errors, document them and file a dispute. Include proof such as copies of canceled checks or payment receipts with your dispute. By law, the credit bureaus must remove any incorrect information from your credit report.

Negotiate with Your Creditors

4

Negotiate new payment terms. For derogatory credit that is correctly reported, work with your creditor to find a compromise that enables you to pay and make current your account if it is still open.

5

Request that your account be "re-aged." If the account is open, your creditor can change the date on the account to reflect a re-aging agreement that makes your payment history more positive.

6

Consider "pay for deletion" options. If the derogatory account is charged off, your creditor may agree to delete the account from your credit report if you pay it in full. Get any agreement in writing before you pay.

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How Fast Can a Credit Score Improve?

You can ruin your credit score in a day, but it may take years before you become an excellent credit risk again. Focusing on boosting your credit score is a good idea, but also a long-term process. There are ways to boost your score dramatically in a matter of days, but not if you have legitimate red flags on your credit report.

Fastest Way Possible

Credit reports sometimes contain errors, such as bankruptcies that belong to another person, or a creditor reporting an on-time payment as late. Rapid rescoring companies have special approval from the credit agencies to fix mistakes on creditor reports in as little as 72 hours. Normally, disputing an error with an agency takes 90 days before they remove the mistake. This service is only available through lenders and costs upward of $50 -- a meager sum compared to what you can save on a loan by deleting an error.

Considerations

Paying your bills on time and eliminating credit card debt gets you well on your way to improving credit score, even if the credit agencies probably won't update your report for another few months. A month or two of paying bills on time, however, probably does not do much for your score. The Motley Fool suggests that significant improvement in a score does not happen until after six to 12 months of perfect payment history.

Things You Can Do Right Now

Credit experts, such as Liz Pulliam Weston of MSN Money Central, say borrowers should not use more than 30 percent of their available revolving credit limit -- called credit utilization. Ideally, you should pay off all of your credit card debt, but you can lower your credit utilization ratio by raising your limit. Ask your lender for a spending increase, but see if you can get one without a credit check, because an inquiry dings your score one to five points. If you have an old card, put a small charge on it and pay the balance each month. Creditors do not report accounts that you stop using for a few months.

Misconception

Do not cancel old credit cards. Part of your credit score comes from the average age on your accounts. If you already have several types of credit, such as an installment loan, credit card and retail card, avoid applying for new debt. You do not want to take on unnecessary debt or build history on a new account unless you are coming out of a bankruptcy or trying to get a good mix of loans.

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How to Write Letters to Credit Bureaus

Your credit report contains a complete record of your financial history, including debts you have, payments you make, loans you've taken out and credit cards you use. You can also find out who else has requested to see your credit report, such as a potential lender. The basic purpose of a credit report is to let a lender know if you have good enough credit to pay back your loan. You can obtain your credit report by contacting a credit bureau.

Instructions

1

Type the date you plan to send the letter, your name and your address at the top of the letter. This will ensure the credit bureau knows where to send the report.

2

Type the name of the credit bureau you're contacting and the address of the credit bureau below your address.

3

Start the letter with a polite greeting, such as "Dear Sir or Madam," or, "To Whom It May Concern."

4

State your reason for writing to the credit bureau in the first paragraph. Explain right away that you'd like to receive a copy of your credit report.

5

Continue the first paragraph by providing all the information they need to send your credit report. This includes your full name, date of birth, social security number and your current phone number and address. You should also include all the companies you've worked for in the past five years and all the addresses for places you've lived in the past five years.

6

Include the legal reason you should receive your credit report for free, if applicable, in the next paragraph. The Fair Credit Reporting Act states that you can receive your credit report for free if you are unemployed, on Public Assistance or were denied credit in the past 60 days. Also, if fraud has caused an error in your credit report, you can also receive it free.

7

Enclose a check or money order if you can't receive your credit report for free. Check with the credit bureau you're contacting to determine how much you should send. You can usually find this information on the credit bureau's website.

8

Add a polite closing to your letter, such as "Sincerely" or "Best Regards." Type out your name below the closing, skipping about three spaces.

9

Print out the letter, and sign your name between the closing and your typed name. The credit bureau will require that the letter be signed before they can send you credit report.

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How to Freeze Your Credit Score

States have created laws requiring credit bureaus to permit credit "freezes." A credit freeze stops people from accessing your credit report. This prevents the opening of new credit accounts. Credit freezes won't adversely affect your credit rating or score, according to the Federal Trade Commission (FTC). However, you will need to make a request with each of the major credit bureaus, including Experian, Equifax and TransUnion.

Instructions

1

Learn about local laws. Each state has different laws about credit freezes. The majority of states require that credit bureaus offer this service; however, some states don't. Alabama, Missouri and Michigan haven't adopted credit freeze laws yet. Check out your state laws through Consumer's Union.

2

Request a credit freeze. Freeze your credit by contacting each of the credit bureaus directly. The credit bureau will verify personal information to establish your identity. For example, the bureau will ask for a specific payment amount of a debt obligation. Keep credit files close when freezing credit to answer questions.

3

Receive a PIN number. Each credit bureau will provide a PIN number. Keep this number in a safe place. The PIN number is used in the future for lifting a credit freeze.

4

Pay the appropriate fees. Each credit bureau charges a $10 fee to freeze credit. Some states require credit bureaus to offer credit freezes at no cost. Ask credit bureaus for the appropriate fee information in your state.

5

Access your credit by requesting an "unfreeze." Contact each credit bureau, provide the appropriate PIN number and ask that the freeze be lifted. You can lift the freeze for a specific period of time, defined by you, to access your own credit. After the period has expired, the credit freeze will be in place again.

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Paying Charge-Offs Won't Always Increase Your Credit Score

A "charge-off" is an uncollectible debt. Companies report charge-offs to the credit bureaus, which lowers your credit score. Although you would think that paying off these accounts would raise your score, that is not always the case.

Significance

Paying off a charged-off debt does not remove it from your credit report, but updates it from "unpaid" to "paid." Although this will have a positive effect on your credit rating, the item will still remain on your credit report for seven years.

Time Frame

Old debts have less of an impact on your credit score, according to MSN Money. Paying off an old charged-off debt makes the debt more recent, which can lower your credit score.

Considerations

Check the balance of charged-off accounts on your credit report. If the balance says "zero," as often happens when accounts are turned over to collection agencies, paying it off will not raise your credit score.

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How to Reach an 840 Credit Rating

A FICO score is only one type of credit bureau score used to evaluate creditworthiness, but it is the most commonly used. Credit bureau scores are based on your history of debt repayment and help lenders assess your qualifications for a loan and whether you are financially secure enough to pay your lender back. Better credit scores qualify you for higher loan limits and lower interest rates. A FICO score ranges from 365 to 850, and a score in the 740 to 850 range qualifies you for the best lending rates.

Instructions

Raise Your FICO Score to 840

1

Make all your monthly balance payments on time. Ideally, you should pay off your entire balance but if not, try to make the minimum payments. Consistency is the key, and late or missing payments will lower your credit score. If you miss a payment, contact your creditor immediately to resolve the situation and determine if the incident has been reported.

2

Avoid maxing out your credit. Carrying a big balance can downgrade your credit score. Keep your total balance to an amount less than 30 percent of your overall credit line.

3

Maintain a diverse credit history. A longstanding record of credit shows that you are not a risk, so you should manage a combination of credit cards and other debt such as car loans or home loans. If you have unused credit cards, do not cancel any accounts unnecessarily.

4

Refrain from applying for too many lines of credit at once. Starting another line of credit can lower your credit score.

5

Check your credit report periodically for any errors, inconsistencies or even signs of identity theft. Under the Fair and Accurate Credit Transactions Act, you are entitled to a free credit report once a year from the three major credit reporting agencies--Equifax, Experian and TransUnion. If you find an error, contact the credit bureau to file a dispute.

6

Avoid any excessive use of credit lines for at least two months before taking out a major loan to ensure that your repayments are accurately shown in your FICO score.

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Ten Best Methods for Cleaning a Credit Report

You can clean your bad credit report most effectively when you combine several methods to erase negatives and beef up the areas that help your credit score the most. Showing responsible use of credit will go a long way toward repairing a poor score. Also, if you find mistakes on your credit report, they can be disputed.

Get Credit Reports from the Right Source

You need your credit reports to find mistakes that can be cleaned off your records, but the bureaus make you pay for orders through their websites. Get reports via AnnualCreditReport.com, the Federal Trade Commission advises, because it gives you free, no-obligation copies once per year as mandated by federal law.

Dispute as Many Mistakes as Possible

The Fair Credit Reporting Act, which regulates credit report disputes, places no limit on the number of complaints you may file. Mistakes do not have to directly relate to an item's influence on your credit rating. Late payment information in a credit card entry hurts you but cannot be disputed if it is accurate. You may still dispute that entry if anything else is wrong, like the account origination date or credit limit.

Send Disputes Through Postal Mail

The FTC advises writing dispute letters and sending them out via certified mail. The credit bureaus encourage online disputes, but the Internet does not provide hard evidence of receipt or allow you to attach additional documents.

Validation of Changes

The credit bureaus give you fresh credit report copies after they process your disputes. Compare the new reports to the bureaus' summaries of your dispute outcomes to be sure all the relevant data is erased. Notify them if you find anything remaining that should be gone.

Remove Hard Inquiries

Hard inquiries show up on your credit reports when you apply for new accounts, and MyFICO warns that too many hurt your credit. Clean them off by requesting proof of authorization from the relevant companies, the Illinois Attorney General advises. Those companies must erase the inquiries if they cannot produce documentation showing that they had your permission to pull your credit history.

Set Up Automatic Payments

Timely payments are an important part of cleaning your credit reports, as they account for over one-third of your credit score, according to scoring site MyFICO. Most banks let you set up automatic bill payments, eliminating the risk of missing the deadline and adding a delinquency to your credit reports.

Pay Down Your Debt

High credit card debt looks bad on your credit reports, so MSN Money writer Liz Pulliam Weston recommends lowering your balances to no more than 10 to 30 percent of your credit limits. This improves your debt-to-available-credit ratio.

Use Credit Regularly

Clean credit reports contain positive, current information. Generate this by using your credit cards regularly, even if it is just for small purchases. Buy things you can pay off readily so your reports show a history of responsible credit use and payments.

Monitor Credit Reports Regularly

Mark your calendar as a reminder to get your free credit reports every 12 months. Alternately, you can get a single report from a different bureau every four months to catch mistakes. Clean up your reports as needed whenever you find new errors.

Use Personal Statements on Your Reports

You may not agree with some of the information left on your credit reports after you clean them. Add personal statements explaining your position, as this information gets passed along to lenders. These statements are limited to 100 words, according to the Federal Reserve Bank of San Francisco, and must be submitted separately to each bureau.

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