How to Clean up Your Credit Report

How to Clean up Your Credit Report: A Guide

You can clean your credit report and benefit from an improved credit score. The high credit score will assist in increasing your chances of being approved for loans, credit cards, and mortgages. You can also qualify for lower rates on these loans.  

The information in your credit file could determine the success or failure of the next credit application.

A quick review of the report and tidying it up could increase the chances of getting approved and reveal some new methods to cut costs as well as improve the credit rating.

Why a good credit score is important

The lenders check your credit history whenever you apply for financial products including loans and credit cards. Your employer or landlord may also be looking at your credit score before renting an apartment or giving you a job. 

The information in your credit report can help lenders assess your capacity to pay back your debt. If there’s a mistake in your credit file, it can affect your approval rate and could affect the terms you are offered.

Are mistakes on credit reports common?

In reality, one in four Americans has a mistake on their credit reports. That means there’s a lot of work to be done to get it right.

Apart from identifying any mistakes and fixing them, you could focus on paying off debts to boost your credit rating.

How do you clean up your credit report?

  • Check your credit report
  • Examine your credit report
  • Dispute credit report errors
  • Repay any outstanding delinquent debts

We have discussed each of these steps below:

1. Request your credit report

The first step to clean up your credit report is to understand how the process should start. You must review your credit report from the three main credit bureaus:

Experian, Equifax, and TransUnion. You can receive free credit reports from each credit bureau by going to AnnualCreditReport.com.

2. Examine your credit report

After you’ve pulled those credit scores, go through them all and ensure that the information is correct. Check the following aspects:

Personal information

Like the name and address that are listed on your account

Information about your account

Including credit limit, balances payment history, as well as the current state (active, inactive, or closed)

Collection and bankruptcy status

For example, the case where the accounts you have were marked as past due for more than 30 calendar days and then sent to an agency for collection. You should also confirm your bankruptcy status on the report.

3. Dispute credit report errors

If you find any mistakes in your credit reports, start an inquiry as soon as you can. It is best to start the dispute directly with the bureau that holds the incorrect information. It can be done either online or by mail.

What happens if I dispute?

The outcome will be in two ways. If the dispute settles in your favor, the credit bureau must inform the two other bureaus who will update your report with the correct information. 

If the dispute was not resolved, you still have the option of filing an official written statement which can be included on your credit report. You can also pursue further action with the FTC and the CFPB.

4. Repay any outstanding dues

If your credit card debts are due, it is important to ensure that they are paid off on time. You should also consider staying within your credit card limit. Overspending may increase your credit card utilization rate and this won’t be healthy for your credit score. 

How to repay your credit card debts

Make a balance transfer 

When you transfer your balance to the card that has no charges until 21 consecutive months are over, you’ll be able to pay it off faster and at a lower cost. 

Some credit card companies offer long balance transfers with an introduction period of 18 months. After the period is over,  you’ll be charged a 14.74 percent to 24.74 percent variable APR. Balance transfers must be made within 4 months from the account’s opening.

Consolidate debt using personal loans: 

As balance-transfer cards generally require excellent or good credit, you might think about applying for an individual loan to repay the debt. Personal loans usually require more lenient credit criteria and can be beneficial to pay off large amounts of debt.

You can redeem rewards: 

If you accumulated points, cash back, or miles, you may exchange them for credit on your statement to cover a portion of your debt.

If you don’t have any credit card debt, keep paying off any balances in time and in full every month. It’s equally important to maintain an acceptable credit utilization rate that is at or below 10 percent.

The benefits of cleaning your credit report

There are many benefits of ensuring that your credit report is in good shape.  First, you’ll not have any mistakes on your credit report which will help strengthen your credit rating.

You could also be able to see an increase in your credit rating if you removed any negative information and or paid off major debts that reduced your score.

Repaying credit card debt by way of an account balance transfer or a personal loan can help you save money on interest costs.

This could allow you to utilize the additional cash you’d have spent on interest to fund your emergency funds or a high yield savings account.

 

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April 20 2022
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