How to Fix the Problems on My Credit File

Inaccuracies on your credit report can seriously impact your credit score. Three main credit reporting agencies are responsible for maintaining credit file information, but individual consumers must ensure that the items listed are correct. You can fix problems such as incorrect identifying information or outdated negative items by filing a dispute with each of the three reporting agencies. You'll need copies of your current credit reports. Consumers have access to one free copy of their credit file annually from each reporting agency.

Instructions

1

Order a copy of your current credit file from each of the three reporting agencies. The three reporting agencies are Experian, Equifax and TransUnion. Each company has a website where you can order a free report. You can also visit annualcreditreport.com or call (877) 322-8228 to order all three reports.

2

Review each credit report for problems you can fix. Negative account information that is correct cannot be removed, unless the listing is outdated. Judgments, charge-offs, late payments and collection accounts can stay in your credit file for seven years. Bankruptcies stay for 10 years. Identifying problems such as an incorrect spelling, wrong address or date of birth require supporting documentation to fix the problem. Supporting documents include a birth certificate, driver's license, W-2 form, social security card and utility bill.

3

Highlight or write down the identification/transaction number and the name of the company reporting the inaccuracies in your credit file. This information helps the individual credit bureau identify the problem. Transaction/identifying numbers can be different for each agency.

4

File a dispute with each agency referencing the incorrect information. You can file your dispute online. Each company also allows for mail-in disputes; follow the steps outlined on the agency's website for disputing credit file information in writing.

5

Wait to hear back from the reporting agencies. They have 30 days after receiving your dispute to investigate the dispute. You can follow the progress of your dispute online. After 30 days, problems with your identifying information or account listings will be corrected or removed if the investigation deems it appropriate.

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How to Decode the Credit Score Factors

Your credit score provides banks, potential employers or future landlords a snapshot look at your level of financial trustworthiness based on your credit report. Credit scores, also called FICO scores after the Fair Isaac Company, assign a single, three-digit number to your current financial picture that ranges from 350 to 850, with 850 reflecting the best money management. While a credit score may seem like a magic number, you can decode the credit score factors to understand what your score currently says about you.

Instructions

1

Identify how the credit score is divided across a number of factors. Payment history makes up 35 percent of the score, amounts owed equal 30 percent, 15 percent is based on your length of credit history, while new credit and the types of credit used each represent 10 percent of the score.

2

Understand payment history to mean both the positives and negatives of your past payment behavior to any creditor. This includes when payments were late, how often, how many times, how long ago and if the past due items went to collections, as well as any amounts still owed on delinquent items. History also means bankruptcy, liens against you, law suits and how many accounts were positively settled "as agreed" through regular payment methods.

3

Think about amounts owed as just that -- what you owe on the loans, lines of credit or credit cards you currently have. Amounts owed also considers the number of accounts open, what types of accounts they are, such as all credit cards, as well as how many accounts have balances. On accounts with balances, the score examines the amount of balance compared to the total credit limit or original loan amount.

4

Look at your length of credit history to mean how long you've had a relationship with each creditor, bank or business. The age of an account tells you if the relationship is brand new, or more established and shows if you opened a large amount of accounts in any one time. The score also looks to see the last time you used your account, so a credit card with no balance that hasn't been used in years may not look as good as one that is used for occasional purchases.

5

Know that new credit reflects in your score if you've recently opened a number of accounts and what kinds of accounts these are. New credit also takes into account how many credit inquiries you've had recently and if you shopped around or did all of these inquiries in a relatively short period of time, or if you've been on the hunt for credit for a while.

6

Realize that types of credit used simply provides a basic view of what kinds of accounts you have and how many of them are there. A person with solely credit cards may not score as favorably as a person with a credit card, a student loan and a car loan, provided the payments are up to date and balances aren't close to the limit.

7

Request a copy of your credit report, which you can get free once a year (see Resources), and look over the report with each of the credit score factors in mind to see where you can make changes in your payment patterns and reduce debts.

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How to Get a Husband's Bad Debt Off the Wife's Credit Report

The number one cause of marital strife in the United States is financial difficulty, according to experts at Divorce.com. Not communicating with your spouse regarding money, debt and spending can cause big problems in a marriage. It is important to be up front about finances and expectations regarding spending, credit and finances before getting married. When a couple marries, they do not take on each other's existing bad debt. Each person retains a separate credit rating. However, when jointly financing a home, car or applying for credit, both scores come into play. While it's impossible to simply remove a bad credit score from your credit report, it is possible to improve your situation. Getting bad debt off a joint credit report requires planning and the commitment of both spouses to improve credit scores.

Instructions

1

Obtain a current credit report for both spouses. Most creditors use a combination of three reports: TransUnion, Equifax and Experien. Several sites offer a free report from one or all of these credit bureaus. Apply for a report either via mail, phone or online.

2

Sit down together and go over the credit reports. Check to see if there are any inaccurate charges on the report. Make a notation beside any reports that you believe to be incorrect.

3

Locate contacts for any companies that have listed incorrect or inaccurate charges on your credit report. Contact each company by phone and ask what their procedure is for disputing a charge on the credit report. Most companies have a form you must fill out, or will ask you to write a detailed letter explaining the problem. Fill out forms and write letters as indicated. Note that it can take months for these companies to respond.

4

Contact the local credit bureau upon receipt of a favorable dispute letter and notify them of the decision. You will probably have to provide the letter from the company in question, stating that they have removed the bad debt from the credit report. You may have to check back several times to ensure the debt is off the credit report.

5

Start working on the bad debt in the meantime. Contact creditors and attempt to make payment arrangements. Note that bad debt paid off over time improves a credit report faster than making one large pay-off payment.

6

Pay off the bad debt on time as arranged with each creditor. While this is a long process, paying on time, over time is the best way to remove the bad debt from the credit rating.

7

Contact the creditor as each bad debt is paid off and ask for a letter stating the debt has been satisfactorily paid. Ask the company to remove the bad debt from your credit report. Ask how long this process usually takes, as it varies from company to company. Repeat Step 4, checking with the credit bureau to ensure the bad debt has been removed from the report.

8

Organize each creditor in file folders as you work through the process. Staying organized as you work to improve credit will save you time and help you find necessary documents at a moment's notice.

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What Are the Differences Between the Credit Reporting Agencies?

It can be disheartening to discover the 750 credit score you have at one agency is 640 at another. Especially frustrating is a situation where your lender just happens to request information from the agency where your score is the lowest. Although it may seem unfair, this happens because while all three credit reporting agencies have the same goal, each achieve this goal in a different way.

Access to Information

One difference among credit reporting agencies is the information they obtain and use to compile your credit report and calculate your credit score. Although each agency works with the same type of information, including personal information, credit history and payment activity, they do not all work with same amount. Instead, Equifax, Experian and TransUnion, the three major agencies, rely on information your creditors provide. However, creditors do not have a requirement to provide information to all three agencies and as competitors, there is no information sharing system in place. As a result, the information each works with may be similar but not always the same.

Scoring Model

Another difference among credit reporting agencies is the scoring model each uses to calculate your credit score. Although the Fair Isaac Corp., or FICO, model most often forms the basis of each agency's scoring system, individual agencies adopt their own versions. For example, Experian uses the Experian/Fair Isaac Risk Model, Equifax has the Beacon model and TransUnion uses the Empirica model. Each comes from the FICO model and uses similar criteria but weighs criteria differently. In addition, each has the option to create and use a model specific to the agency. Although credit reporting agencies do not publish specific scoring model methods, you can get a general idea of the weight given to individual criteria by examining the FICO model. Credit score assessment, according to the FICO method, generally breaks down as follows: payment history about 35 percent, total debt load about 30 percent, length of your credit history about 15 percent, amount of new credit about 10 percent and all other factors, such as the mix of credit types, is about 10 percent.

Considerations

When you apply for a credit card or an installment purchase loan, the differences among credit reporting agencies may or may not work to your advantage. If your lender pulls a report from only one agency, the scores he sees is part of what he will base approval decisions on. In the case of a mortgage loan, however, lenders usually view reports from all three agencies.

Tips

Credit reporting agencies are information receivers, not information verifiers. With so much riding on the strength of your credit score, small differences among credit reporting agencies and the potential for inaccurate information can mean a lot. If you are at a cutoff point, this can mean paying a higher interest rate, receiving a lower credit limit or facing the possibility of rejection. While differences among credit reporting agencies mean your credit will never be the same across the board, you can take steps to close the difference by making sure the information they contain is up to date and accurate. Request and review a copy of your credit file, from all three agencies, once every 12 months through AnnualCreditReport.com. Follow the instructions each provides to remove old or inaccurate information (See Resources).

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How to Improve Your Credit Score in 60 Days

Significant credit repair generally takes some time, as creditors only report to credit bureaus once a month. Some credit reporting agencies, however, like those that generate merged reports for mortgage and consumer credit lenders, provide rapid rescore services that can update credit histories and rescore your credit in a matter of days. While some credit repair strategies, such as making prompt payments after a few late payments, take months to improve your score, others can take as little as 30 to 60 days.

Instructions

1

Get a copy of your credit reports from all three bureaus (Equifax, Experian and TransUnion) for free at annualcreditreport.com; you are legally entitled to one free report per year from each bureau. Check the reports for any inaccuracies and dispute any that you find. Common inaccuracies include accounts under a similar name that aren't yours, closed accounts that show as open, inaccurate open balances or account information, open collections that have been paid and negative comments more than seven years old.

2

Pay down your account balances on credit cards and unsecured or revolving credit accounts. Shoot for a balance of no more than 30 percent of your total available credit limit, but 10 percent is ideal.

3

Spread your balances out over a few credit cards instead of one large balance on one card. A single large balance still shows a predisposition to overload on credit.

4

Use all of your cards for periodic small purchases and pay them off in full when you get the bill. This keeps your balances low, you avoid paying interest and prevent creditors from closing your account due to inactivity.

5

Open a major credit card if you do not have one: VISA, MasterCard or Discover are the best choices. Use it for purchases you would typically pay cash for, such as gas or lunch, and hold the money aside to pay the bill in full when it arrives. However, keep the number of applications and inquiries to a minimum.

6

Settle your collections, if you have any. If you either pay off the account or make payment arrangements then pay as agreed, the collection agency can no longer legally continue to negatively report on you. Make sure to get any agreements in writing and to make any payments by check or money order for record of payment. Ask the collection agency if they can mark the account "paid as agreed" on your credit history or remove the item from your report.

7

Ask your credit card issuers to raise your credit limits, especially if you cannot knock the balance down in a short time, but have a good payment history. This will lower the percentage of your balances compared to your available credit.

8

Keep accounts open and dispute any accounts recently closed by the creditor with the credit issuer. Closed accounts drop the longevity of your credit history and your available credit limit, which negatively affects your score.

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How Does a Credit Score Get Determined?

The Credit Reporting Agencies

There are three main credit reporting agencies that have all the information on how you use credit. They translate this data into a score. The score is referred to as a FICO score after the company that developed the method, Fair, Issac & Co. The score ranges from 300 to 850, with 300 being poor credit and 850 being excellent credit. The credit reporting agencies are Experian, Equifax and Trans Union. Whenever you apply for credit, these three companies are contacted for your credit report and score.

What Determines the Credit Score

Your payment history determines 35 percent of the score. Then it is weighted with a high weight given to recent history. Late payment, bankruptcy and collections subtract from the score. Thirty percent of the score is due to outstanding debt. This debt is compared to your credit limits. Credit history is equal to 15 percent of the score. Credit reporting agencies like to see a long history of on time payments. If you have a lot of new accounts, it takes away from your score. Ten percent of your score is determined by how many recent inquiries you have. If you've been shopping for a mortgage and have had six different banks run your credit, it may negatively affect your report. The last 10 percent is the mix of credit you have. Too many credit cards or new cars is a negative.

How to Better Your Score

The first thing most people need to do is get rid of some credit cards. Three or four major credit cards is fine; more than that, and your credit score will suffer. If your balances are high, pay them down. Start with the smallest and pay it off. Then use that payment to start paying down the next, and so on, until the cards have smaller balances or no balances. Make sure you pay all your payments on time. Get a copy of your credit report and take it with you when you shop for a mortgage or a car. This way they don't all have to run their own, and there won't be any inquiries until you are ready to apply. If you have no credit at all, apply for a secured credit card. You will deposit a little money at a bank, and the bank will give you a credit card with a limit equal to your deposit. Use it and pay it off at the end of each month. Before long, you will be getting applications for unsecured cards. Use the cards wisely, and you will have a great credit score in no time.

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How to Pay Off Several Credit Cards Without a Debt Consolidation Company

In our credit-happy economy, it is easy to run up balances on several credit cards at one time. Between minimum payments, late fees and interest payments, it seems impossible to ever get them all paid back, but you can do it using the debt snowball method popularized by personal finance pundit Dave Ramsey.

Instructions

1

Gather the most recent credit card statements for all your accounts. On each one, locate the minimum payment, interest rate and current balance. Write these down for each credit card account.

2

Find the contact information for each of the accounts. Contact them and ask if there is any way to reduce your interest rate or your minimum payment. You may not have any success, but it doesn't hurt to ask.

3

List the accounts, arranging them from the lowest balance to the highest balance and notate the minimum payment beside each debt. Select the account with the lowest balance to pay off first.

4

Add the minimum payments for each of the credit card accounts. Subtract the total of the minimum payments and your living expenses from your income. The amount left over after subtracting these expenses is the extra amount you can use to repay your credit card debt each month.

5

Send the first credit card company on the list the minimum monthly payment and the extra amount you determined you could afford to use to pay off your credit card debt. Send the minimum monthly payments to each of the other credit card accounts on the list. Continue in the manner each month until the first credit card debt is paid off.

6

Take a moment to celebrate and then cross it off your list. Move to the second credit card account on the list. Send this second credit card account all the money you had previously been sending to the first debt combined with the minimum monthly payment you had been sending all along. Pay the minimum monthly payment on the other debts. Continue in this manner until the second debt is repaid.

7

Repeat the process with each debt remaining on the list. Each time, combine all the money you had been sending monthly to the now-satisfied debt with the minimum monthly payment you had been paying. Continue to make the minimum monthly payments on the remaining debts. Each time a debt is paid off, the amount of money for debt repayment "snowballs" for the next debt on the list.

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