Your credit report isn’t just for loans anymore! Job offers, promotions, security clearances, and insurance quotes are now routinely affected by your credit report or other consumer report.
Follow these steps to rebuild and improve your credit.
Request Current Credit Reports
You’re entitled to a free credit report from each of the three credit bureaus (Experian, Equifax, and TransUnion) every twelve months under the Fair Credit Reporting Act (FCRA), and more often if you are the victim of identity theft or on assistance. Request your credit report regularly and check that all information is accurate.
Address Any Credit Inaccuracies
Credit report errors are fairly common. If there is inaccurate information on your credit report, it’s important that you address it. Write and dispute directly with the bureau. Include a copy of the report with the incorrect listing and highlight the disputed item. Briefly state why this item is listed in error. Attach any supporting documentation that will verify your claim. Send your letter to the bureau by Certified Mail, Return Receipt. It is best to dispute only one item per letter, so if a department store entry and an old credit card are both misreporting, send the dispute in two separate letters. The bureaus have 30 days to respond to your dispute.
If the bureaus don’t correct the inaccurate information, contact a credit report dispute attorney.
Pay Bills in Full and on Time
Falling behind on payments will have a negative impact on your credit history. Always pay on time or get any extension agreement in writing.
Review Current Accounts
Pay down balances on existing credit cards or loans and pay off delinquent accounts. Be strategic about closing cards; consider keeping cards that you’ve had for a long time that show a consistent payment history and consider closing those with high interest. You should only maintain credit accounts that you can afford.
Maintain Stable Employment History and Income
A lapse in employment history can harm your credit. A high debt to income ratio will also reflect negatively on your credit history.
Do Not Take Credit Accounts to the Maximum Limit
Part of your credit score is based on your credit utilization, or the percentage of your available credit you use. Never use the maximum amount of available credit. Doing so will hurt your credit score. It’s best to not exceed fifty percent of your available credit.
Do Not Cosign Loans
When you agree to cosign on a loan, you are liable for payment of the loan, despite any side agreement you may have with the other borrower. If the borrower defaults, you will be responsible for making payments. Co-signing brings a significant risk that you likely don’t want to take on as you rebuild your credit.
Building Credit Takes Time and Discipline
Remember that you must be responsible with credit. Always pay on time and maintain the terms of the credit agreement.