Knowing Your Credit Score
- Before you attempt to repair your credit report, you need to know what is in need of repair. The best way to do this is to order the free credit report your are entitled to annually from Experian, Equifax and TransUnion. The Federal Trade Commission (FTC) states that you can order all three reports from the consumer reporting companies' central website, annualcreditreport.com. The FTC states you should not contact each of the reporting companies individually because you end up paying a fee for a report that is free of charge. If you wish to order an additional credit report within a 12-month period, you could pay a fee of up to $10.50, according to the FTC. The benefit of ordering your credit report is that you can see if your credit score is poor because of your spending and repayment habits, or if errors caused the report to be inaccurate. Errors you should look for include late payments that were not late, statements that you went over your credit limit and lines of credit you never opened.
Fixing Errors Found on Credit Reports
- Any derogatory information on a credit report can lower your credit score. If you find inaccurate information in your credit report, make a list of the accounts in order of age, with the oldest account first. With this information, write a letter to each credit agency that reported inaccurate information about your credit history. Bear in mind that a lender may only report to one consumer reporting company, so it may not be necessary to write a letter to all three. Your letter should state that you believe you found inaccurate information in your credit report. List each error you are disputing, any applicable date and the reason for the dispute. Ask the reporting agency to correct or remove the information in question. In addition to your complete name, write your address in the letter. Enclose a copy of any documents that support your claims, along with a copy of the credit report. The FTC recommends you highlight the information you are disputing the credit report. Keep a copy of the dispute letter for yourself, send the original via certified mail and request a return receipt so you know the company received the documents. It can take up to 30 days for a credit bureau to investigate your claim.
Creating a Budget
- If your credit report does not contain errors, your negative score may be the result of poor spending habits. In this instance, the FTC states you should create a budget that helps you pay off your debts without incurring new ones. When you create a budget, you set aside specific amounts of your income to pay your bills, debts, basic needs and non-essential items, such as entertainment. A budget will help you manage your money. If you do not know how to create a budget, a credit counseling organization can help.
- A good way to repair your credit report is to stop spending money you do not have. Lock your credit cards away and pay for all your bills and purchases with cash, checks or your debit card, which uses the money you have in a checking account. When you pay cash for your purchases, your debts will begin to decrease.