How to Restore Your Credit

If you have endured financial difficulties in the past, your credit report and score may have sustained damage. A low credit score can result in your being turned down for loans or lines of credit. Even if you are approved, bad credit will prevent you from being eligible for low interest rates. Take steps now to restore your damaged credit in order to save money and provide for a secure financial future.

Pull your credit reports from all three credit bureaus, Experian, Equifax, and TransUnion and review them for errors. The credit bureaus maintain millions of company reports and credit reporting errors can and do occur. It is important to acquire credit reports from all three credit bureaus since not all companies report to the same credit bureau.

Contact any company you find on your credit report that is reporting inaccurate information. Explain that the account either does not belong to you or is being reported inaccurately. Ask what information you can provide in order to have the error corrected. In many cases, you will need to provide a picture I.D. and a copy of your credit report to the company to have the error corrected.

Send a letter to each credit bureau currently reporting the inaccurate information if the company refuses to correct it. Request that the credit bureaus conduct an investigation into the item. The Fair Credit Reporting Act states that all credit bureaus must comply with any customer request for an investigation. Each credit bureau has 30 days to investigate the item and either verify or remove it. You will be notified via mail of the results of the investigation.

Write a “goodwill letter” to any companies currently reporting late payments on your credit report. A goodwill letter is merely a statement acknowledging that while the late payment notations are correct, you have been a good customer, make your payments regularly, and would like the company to remove the negative notations from your credit file. Some companies do not acknowledge goodwill letters, but some will comply with your request. Your past payment history accounts for 35% of your credit score. The removal of late payment notations will cause your credit score to increase immediately.

Review your credit reports for any negative accounts that are over seven years old and do not appear in the “Public Records” section of your report. Any delinquent debts over seven years old that are not a matter of public record must be immediately removed from your report . Although the seven year reporting period for delinquent debt is a law, consumers often find that these debts are not removed by the credit bureaus in a timely manner. Contact the credit bureaus and report any debts that are beyond the reporting period yet still appearing on your credit report. The credit bureaus will remove these debts and your credit score will improve.

Change your financial behavior. Getting organized with your bills and payment schedules allows you to never miss a payment and thus not risk damaging your credit. The older negative notations are the less they affect your score. Avoid applying for new debt, pay everything you owe in a timely manner, and monitor your credit reports regularly for mistakes. Being responsible with your debts will gradually increase your creditworthiness and restore your credit.