How to Clear My Credit Record

Your credit report is a reflection of your loan and payment history. Typically, it reflects the past seven years of your debt and payment behaviors. If you've had trouble paying off debts, a negative credit report could block a loan approval or prevent you from leasing a car. Bad credit can be turned around, though, by making payment or settlement arrangements with your creditors and disputing negative items that appear on your report.

Instructions

1

Contact each of the major credit-reporting agencies online and request your free credit report. Each credit bureau is legally obligated to make available to each American a copy of his credit report once a year without charge. The credit bureaus are Experian, TransUnion, and Equifax.

2

Write to each credit bureau and the creditor that made the report to dispute any negative items that you do not believe belong on your report. Each creditor should have a mailing address listed on your credit report. Send them a letter stating why an item is invalid. Also, send copies of any documentation that supports your claim. Copy the letter to each of the credit bureaus and request that the item be removed from your record.

3

Send dispute letters until any negative, invalid items are removed. More than one attempt is not unusual.

4

Circle the debts that you do owe and then call each creditor to set up a payment plan.

5

Negotiate with creditors to take an item completely off your credit report, rather than listing it as paid-in-full or settled, which is more beneficial to your credit score. Obtain a written statement of the creditor's intentions before you send any payments. You can use this if you have to dispute the charge again later. Debts are less likely to be paid the older they get, so your creditor likely will be motivated to make an arrangement to collect less money. You should see positive results if you explain that you want to settle the debt but cannot afford the entire amount.

6

Negotiate for "paid-in-full" even if you're making a settlement. Accounts marked as paid-in-full look better to future lenders than those marked as "settled." Get a letter from the creditor promising to mark your charge as "paid-in-full" so you can have documentation to dispute the charge if it is not changed.

7

Reach settlement agreements if you cannot pay the full amount. Creditors have a vested interest in getting some money out of you; they'll be willing to work with you. You can have as much as 50 percent of your debt removed if you're willing to accept a settlement. Be sure to get a letter from the creditor that serves as written proof of the creditor's promises.

8

Pay off your debts and then check your credit report again. Each time you dispute a charge on your credit report, you're entitled to a new free copy. Otherwise, a new copy of your credit report will cost about $10. Be sure the companies to which you made payments actually kept their promises. If they didn't, use the written proof they sent you to dispute the items.

9

Pay down debts that aren't delinquent to increase your available cash-to-debt ratio, a measure of the money you have available--e.g., unused credit on a credit card--against the debt you have--e.g., money you haven't paid off on a credit card, unpaid medical bills, mortgages or student loans. You want to be sure you aren't carrying large, increasing debt from month to month.

10

Build new credit. Get a new credit card and pay the balance every month. If you're denied, consider applying for a secured credit card to improve your credit score. To get a secured card, you must pay a cash deposit that varies depending on your credit score. This deposit allows a card company to give you credit without risk. A secured credit card allows you to make a positive entry on your credit report, as long as you pay it on time every month.