You want to know, "How can I clean up my credit? " There are really just 5 basic steps. Improving your credit is not complicated, but credit repair does require some work and discipline.
Step 1–Getting Ready
Get copies of your credit report and examine it to be sure it is accurate. You can get a free credit report from www.annualcreditreport.com. You can also call 877-322-8228 to request it by phone.
Step 2–Time to Clean up My Credit
Your credit report may contain errors. If so, take the necessary steps to correct them. This is key to your repair of bad credit. Under the Fair Credit Reporting Act, both the credit reporting company and the source of information are responsible for correcting errors, and inaccurate and incomplete information. That means you may need to contact both the credit reporting bureau (i.e. Equifax, Experian, TransUnion) and the business or institution who provided the incorrrect information.
You will need to inform the credit reporting company from whom you got your report (for example, TransUnion) of the errors in writing. Your letter must clearly identify each item in the report that you are challenging, and you will need to provide copies of the documents that support your position. I suggest that you accompany your letter with a copy of your credit report with each item you dispute circled. Next to each disputed item, write, "I contest this." Be sure to say that you want all items under contest to be deleted.
It is also important to notify the creditor of incorrect information and provide copies of the documents that support your position. If the creditor finds that the disputed information is, in fact, wrong, it must notify Experian, Equifax, and TransUnion of any errors.
If the information you are disputing turns out to be accurate, there really isn't very much you can do other than let time run its course. The time limit for most negative information is 7 years, while bankruptcies stay on the record for 10. Criminal convictions can also stay on the credit report indefinitely, as do records of applications for jobs that pay more than $75,000 a year, and applications for more than $150,000 worth of life insurance or credit.
Step 3–Knowing how Your Credit Score is Determined
The following factors are key determinants of your credit score:
*pay bills on time
*knowing your current debt load
*length of credit history
*application for lots of new credit accounts
*the number and kinds of credit account you have
Step 4–Paying Your Bills
One of the important things you can do to improve your credit rating is simply paying your bills on time. This requires that you list all of your sources of income and strictly manage the outflow of money. You will need to list all fixed expenses, such the utility bill, mortgage payment, car payments, and insurance premiums, for example.
Step 5–Paying off Debts
Make an inventory of all of your current debts. Contact your creditors to let them know your plans to clean up your credit and pay off your debts. Make arrangements with them to start making payments. If they understand that you are sincere, they may be willing to negotiate more modest terms of repayment.
Step 6–Legal Rights and Scams
Take the time to understand the legality of the steps you can take to improve and clean up your credit. The Federal Trade Commission site's can Building a Better Credit Report get you started. Below I've provided an excerpt from ftc.gov to help you become familiar with some of your legal protections:
The Federal Trade Commission enforces a number of credit laws and has free information about them:
The Equal Credit Opportunity Act prohibits the denial of credit because of your sex, race, marital status, religion, national origin, age, or because you receive public assistance.
The Fair Credit Reporting Act gives you the right to learn what information is being distributed about you by credit reporting companies.
The Truth in Lending Act requires lenders to give you written disclosures of the cost of credit and terms of repayment before you enter into a credit transaction.
The Fair Credit Billing Act establishes procedures for resolving billing errors on your credit card accounts.
The Fair Debt Collection Practices Act prohibits debt collectors from using unfair or deceptive practices to collect overdue bills that your creditor has forwarded for collection.
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