Four Steps to Cleaning Up Your Credit Report
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If you aren’t happy with your current financial state and want to change it for the better, you can take these four steps to help you clean up your finances:
1. Pull a copy of your credit report.
In order to improve your financial state, you must first know what information your creditors are reporting to the credit reporting agencies.
You can find this out by ordering a free copy of your credit report from annualcreditreport.com. You are entitled to one free credit report from each of the three national credit reporting agencies every 12 months. In order to regularly monitor your credit report, try to order one of your free reports about every four months. You can also obtain your credit score from each agency by paying a small fee.
Once you’ve pulled a copy of your credit report, carefully comb through it to check for any errors that could potentially harm your credit score.
As you review your credit report, consider the following:
2. Fix any inaccuracies and outdated information.
If you spot an error in your credit report, you can file a dispute—either online or by mail—with the credit reporting agency that reported the error. Once your dispute is filed, the credit reporting agency will investigate the issue within 30 to 45 days. The agency will notify you of the outcome after the conclusion of the investigation.
When you initiate communication with a credit reporting agency or a lender, take detailed notes that include the names of the people with whom you speak and the dates of the conversations. If you are told that your information will be corrected, make sure you follow up to confirm that the change has been made.
If you correct an error with one of the national credit reporting agencies, your information will also be updated with the other two. If you need more immediate action, consider contacting each credit reporting agency individually.
3. Organize your paperwork.
Whether you are organizing your financial records for the first time or it’s simply been a while since you’ve reviewed them, start by laying out all of your paperwork and organizing it into categories. Examples of these categories include credit card statements, credit reports, mortgage payments, tax returns, insurance policies, and medical bills.
Once you’ve categorized your records, create a folder for each and place the corresponding documents inside. Shred any that you don’t need to help ensure safe disposal.
Remember to file away any communications you’ve had with the credit reporting agencies about disputes or errors or about statements you’d like added to your credit report.
If you’re tech savvy and prefer electronic filing, you can scan all of your financial paperwork onto your computer. You can also request electronic access to your credit card statements to make them easier to organize. If you opt for electronic filing, make sure you also back up all of your financial records on a separate drive.
Once your paperwork is organized, make sure all of your payments are up to date. If you owe any debt, write it down on a master list so it doesn’t slip your mind.
4. Pay your bills.
Knocking out some debt could reflect positively on both your credit report and credit score. If you have any late payments or accounts in collections, create a budget that will help you pay off the debt as soon as possible. By paying down your debt, you will open up your available credit, which you can then use responsibly to add positive information to your credit report. This information can, in turn, positively affect your credit score.
As you finish cleaning up your credit report, designate a specific day each month to reevaluate your finances so you can head into the new year stress free.
Ilyce Glink is the author of ten books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask. Her nationally syndicated column, “Real Estate Matters,” appears in more than 125 newspapers and Websites, and her online “Ask Ilyce” columns are read by hundreds of thousands of people every month. She is a top-rated radio host on WSB Radio in Atlanta, the Home Equity blogger at CBS MoneyWatch.com, host of the Internet program “Expert Real Estate Tips,” managing editor of the Equifax Personal Finance Blog, and publisher of ThinkGlink.com.
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