It’s finally spring! Time for April showers, May flowers and some spring cleaning. While you may be focused on cleaning your home or garage, it’s a great time to clean up your credit report, too.
You may already know that lenders look at your credit to determine if they want to lend you money, but mortgage lenders aren’t the only ones looking. Auto lenders, credit card companies, insurance providers, landlords and even employers look at your credit to learn more about you, so it’s important to maintain a clean and updated report.
If you don’t know where to start, don’t worry! We’ve highlighted six steps you can take to clean up your credit in time for your next big purchase.
Know Where to Find Your Credit Report
The first step to cleaning up your credit report is to have the report in front of you. Check out a reputable credit website such as Rocket Homes, which allows you to see your TransUnion credit report and score, updated for free every two weeks. They make it easy to see your report and understand how you can impact it.
Check Your Credit Report(s)
Reading your report line by line may not sound fun, but making sure your information is correct is vital to maintaining good credit. Creditors can choose which bureau they send information to, so not all reports have the same information on them, making it important to check all three of your reports regularly. You’re allowed to request your report from each credit bureau for free once a year.
This is particularly essential if you’re thinking about applying for a loan. Different lenders look at different reports, and an error on one of your reports may not come up on another. You want to be prepared for anything your lender could come back to you with.
Look for Inaccurate Information
Nearly one in five people have an error on their credit report, according to a study done by the FTC. Of these people, approximately 20% of those who disputed the error were able to increase their credit score. These errors can cost you a lot of money in interest on a loan and could even prevent you from getting a loan at all.
What Should You Be Looking For?
- Items that should have been aged off: Credit inquiries will stay on your report for two years, while missed payments, delinquencies and tax liens can stay on your report for seven. If it’s been longer than this, these items shouldn’t be on your report anymore.
- Taxes, collections or liens that are listed as unpaid even though you paid them: While they will still influence your credit score and appear on your report, they should indicate that you’re up to date on your payments.
- Unauthorized accounts that have been taken out in your name: These are even more important to catch as they could mean you’re a victim of identity theft.
- Personal information that’s about someone with the same name as you or a similar one: It should also have your current employer, marital status and home address.
If you find incorrect information, you can dispute it with the credit bureaus. If your dispute is valid, they are legally responsible for correcting your report. Oftentimes, credit repair companies will dispute errors for you, but it’s relatively easy to do on your own online or via mail.
If you choose to dispute an error online, you can fill out a simple form found on each of the three credit bureaus’ websites:
Or you can send a written letter to the credit bureaus at the following addresses:
Consumer Dispute Center
P.O. Box 2000
Chester, PA 19016
Equifax Information Services LLC
P.O. Box 740256
Atlanta, GA 30374
P.O. Box 4500
Allen, TX 75013
In your letter, ask for the error(s) to be removed or corrected, and explain what information you think is inaccurate and why you are disputing the information. If possible, try to include any evidence you have that backs up your claim. Credit bureaus have 30 days to review your dispute and take action, so check your credit report after to make sure they’ve followed through.
Know What Isn’t a Big Deal
Closed accounts may not look pretty on your report, but there’s no need to get them removed. In fact, removing closed credit cards or loans may negatively impact your score.
Part of your score is based on the length of your credit history, so getting rid of a closed account could shorten your credit history and thus lower your score.
Understand What’s Impacting Your Score
There is no quick fix for improving your credit, but there are steps you can take today to help positively impact it over time.
One of the most important factors influencing your credit is your credit utilization ratio, which is the amount of debt you have relative to how much credit is available to you. To keep your credit in top shape, use less than 30% of your credit limit. If you have more debt than that, consider using your tax refund to help pay it down.
Paying your bills on time is also vital for a good credit score. Late payments over 30 days can devastate your score, so even if you can’t pay all of your bills at once, make sure you’re paying at least the minimum on time.
Resist the urge to open a store credit card every time there’s a special offer, as credit inquiries impact your score, too. Yes, getting 20% off of your purchase at Gap is nice, but it may not be worth docking your credit score by a few points each time you get a new card.
Good Credit Isn’t Just for Spring
Maintaining good credit isn’t for just one season – it’s a year-round process. Cleaning up your credit report today will help ensure your credit is ready for your next goal, no matter what time of year it is!
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