How to Clean Up Your Credit? (Credit Basics)

You’ve just received your credit report and noticed that you have a lot of work to do to clean up your credit. It may seem overwhelming at first, but we have some helpful tips you can follow to help you clean up credit fast.

In addition, it is good to learn a little bit more on your own. There are sites that are really good at helping you do this. Many of them also have credit monitoring services, which for a busy person is EXTREMELY helpful.

How to Review All Credit Reports

Make sure you obtain a copy of your credit report from all three major credit bureaus. There may be a negative item that shows up on one credit report but not the other two, so it’s important to know what all three reports are showing before you get started cleaning up your credit.

You can visit The Annual Credit Report website to obtain a free copy of your credit report from the three major credit bureaus.

When you receive your credit report, you will need to review it for correct information and errors. Errors in your credit report can negatively impact your credit score, and they are a lot more common than people realize. It is estimated that one in five people have an error on the credit report, so you’ll need to make sure there are no errors on your credit report.

Personal information, account information, loans, credit inquiries, and payment history are all specific areas you should review when you receive your credit report. If you are not sure what a credit report is, read about it prior to moving forward.

How to Dispute Any Errors You Find

If you find any error on your credit report, you should dispute it immediately. Disputing errors on your credit report with the credit bureau can get the error corrected and potentially increase your credit score. If the credit bureau is correcting the misspelling of your name, your credit score won’t be affected, but you should have it corrected so your credit report reflects all your correct information.

To dispute an error on your credit report, you will need to notify the corresponding credit bureau. You can notify the credit bureau online or by mail. You’ll need to provide information to the credit bureau to correct the account.

Where to Submit Online or Mail Disputes

Experian Disputes

File Online

P.O. Box 4500

Allen, TX  75013

TransUnion Disputes

File Online

P.O. Box 2000

Chester, PA  19016

Equifax Disputes

File Online

P.O. Box 740256

Atlanta, GA  30374-0256

How to Understand Your Credit Utilization Rate

Your credit utilization rate is another factor you need to consider when cleaning up bad credit. Your credit utilization is the total balance of your credit cards divided by the total credit limit.

The more you use your credit card, the more your credit card balance will increase. The higher your balance grows, the higher your credit utilization rate will be.

Your credit card accounts are reported to the three major credit bureaus each month. The credit bureaus receive the credit balance and the credit limit for each of your accounts. The total balance and credit limits of all cards establish your credit utilization rate.

Lenders and creditors will consider your credit utilization rate when approving you for a loan or a credit card. A high credit utilization rate can bring down your credit score because it shows lenders and creditors how much of your credit limit you use every month.

Try to keep your credit utilization rate below 30% to help clean up your credit report. You can lower your credit utilization rate by paying down balances on your credit cards each month and refraining from running the balance back up.

Your credit report is updated each month from the information provided by the credit card companies. When you pay off a credit card or a significant portion of your credit card, your credit utilization ratio decreases the following month.

Try to keep your credit utilization rate below 30% to help clean up your credit and lower your credit score.

How to Clean Up Late Payment History

Cleaning up your credit means trying to remove negative items like late payments from your credit report. Late payments are payments that have been made 30 days past the due date. Late payments can significantly impact your credit score even after the account is back in good standing. Unfortunately, late payments and negative items can stay on your credit report for seven years, even when the account is currently in good standing.

You can clean up your late payment history by writing a goodwill letter. We recommend writing a goodwill letter if you have a good payment history with the account. Lenders and creditors may consider a goodwill letter if you have only one late payment; however, you will need to contact the lender or creditor to make this request.

Pay Outstanding Bills

If you have an outstanding bill from a loan or a credit card company or have paid the account in full but still have the negative item on your credit report, you can attempt to settle the debt by sending the lender or creditor a pay for delete letter.

A pay for delete letter is a negotiation strategy you can use to pay off the debt and have the negative information removed from your credit report. You should make sure you have the funds to offer a settlement to the creditor or lender when you send the pay for delete letter request.

How to Clean Up Your Credit Report Fast

It’s not an overnight process when you clean up your credit. As soon as you receive your credit report, you need to check it for errors and file a dispute accordingly. Any dispute you file will take between 30 and 45 days to investigate, plus an additional five days for the credit bureau to report their findings to you.

If the credit bureau removes the information in question, you can see the update on your credit report as soon as the following month.

If the credit bureau verifies the information is not an error, the negative item can stay on your credit report for up to 7 years.

The most important thing to remember is that cleaning up your credit takes time, so it’s important to get started as soon as possible.