An individual’s credit score has a huge impact on their overall financial health; a good score can help secure loans at competitive rates, while a poor score may trigger high interest rates, or prevent a consumer from getting loans at all. Thankfully, there are ways to improve credit reports and scores and secure the best rates possible.
Get a Free Credit Report: The first step towards improving all three credit scores is to order a copy of each report and review it for errors. A free credit report is available on a yearly basis to every citizen; people who have been denied credit can also receive a free credit history report.
Once the report is in hand, the consumer should read through it and make sure all of the listed information is correct. Many components go into factoring a FICO score, and eliminating just one bit of wrong or negative information can cause the score to dramatically improve. Credit score and the ability to get credit go hand in hand, so a good report will generally yield a higher score and better interest rates.
A credit savvy consumer will review the report for inaccuracies. Just about any information on the report is open to error, from incorrect reporting of collections to the amount of credit available.
Check credit report for:
- Incorrect amounts owed: If the amount owed is listed incorrectly, the report won’t accurately reflect the consumers utilization, or the amount of credit used. High utilization can negatively impact a credit score.
- Accounts that belong to someone else: If a consumer has no knowledge of a debt, it may not even be theirs. Any unknown debt should be disputed.
- Incorrect delinquencies: Items may list as being paid late, even if they were paid on time. Late payments can damage the credit score and should be disputed.
- Inaccurate reporting of collections accounts: Collection companies are notorious for putting information on a credit report simply to extract money from a consumer. If the information is incorrect, it should be disputed.
- Duplicated collections accounts: An account or debt should only be listed once. If it is listed multiple times by the same organization or by competing organizations, all but one listing should be removed.
- Incorrect judgment information: If a judgment has been incorrectly listed, it should be disputed; judgments can hurt a credit score or impact the consumer’s ability to secure a loan.
Repair the credit report:
Once any errors have been identified, they will need to be removed. As long as a negative item remains on the report, it will drag down the score. The best ways to improve credit scores include validating and disputing negative information.
When a consumer seeks to validate a debt, the business or entity who listed the item is required to prove that it is accurate. For old debts or debts that belong to someone else, a collection agency will have to provide validation, or proof of the debt within 30 days of the request, or remove the item. For best results, validation requests should be sent in writing, with proof of delivery.
If the company is unable to prove the debt, they are supposed to remove it. If they do not, the debt should be disputed with the credit reporting agency. A dispute can be sent in the form of a letter or online, and requires the reporting agency to confirm the debt or remove it. Once negative information is removed, the consumer’s credit score should see an increase.
