You may not think much about your credit rating until the time comes when you need a good score in order to get a new car, house, job, insurance or other important asset. It may take some months, and possibly even years, but you can clean up your credit rating by being more committed to taking care of your financial affairs.
Get Your Credit Report
Get a copy of your credit report. You are allowed one free copy of your credit report every year (go to annualcreditreport.com). You can also order a credit report for free when you are denied for credit. Otherwise, you can order your credit report from the three major reporting agencies (experian.com, equifax.com, and transunion.com).
Scan Your Report
Once you have all three credit reports in front of you, look for the section that lists negative information. This is the area that you need to focus on if you want to clear up your credit rating. Sort through each listing to see if these negative reports are true.
Dispute Incorrect Items
If you find that any of the information is incorrect, dispute it immediately with the credit agencies. You can file a dispute online at the credit reporting agency's website or send a letter containing details about the information and why it is wrong. The creditor that reported the information must provide proof of why you owe the debt. If the company cannot prove its case, the information will be removed. This will cause your score to rise.
Pay Open Accounts
Once you have cleared up incorrect items, go through your credit items and pay off open accounts that are showing as past due, in collections, unpaid or charged off. Call each creditor and negotiate a payoff amount so that the information on your report can be reported as "paid." Eventually, your credit rating will go up.
Don't feel pressured to send money to your creditors immediately after making a verbal agreement. Get an agreement in writing stating that if you pay the amount agreed upon, the debt will be updated as "paid" on your credit report immediately (ask for a "payment settlement agreement in writing"). Keep receipts of your payment and present all of this information to the credit reporting agency if the item is not removed within a few weeks.
Also, if you have numerous missed or late payments on your credit report, get up to date on your payments to get your rating to rise.
Reduce Your Credit Card Balances
Your credit rating is also dependent on the ratio of your credit card account balances to your credit limits. So lower this ratio by paying off chunks of your credit card balances due. Stop using the cards---just allow the balance to fall. If you do this consistently, it will help to raise your credit score over time.
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