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How to Legitimately Clean Up a Bad Credit History

Even if you don’t spend much time thinking about your credit score, it is impacting your finances in various ways. For example, a high credit score can help you negotiate better interest rates on loans and much more. However, bad credit history can come with many consequences, including the following:

  • Difficulty renting an apartment.
  • Higher interest rates.
  • Increased insurance premiums.
  • More restrictive loan contracts.

Overall, lenders, landlords, and employers view people with low credit scores as less likely to follow through on their financial obligations. The result is that people with low scores tend to have fewer financial opportunities in life.

Improving and Maintaining Your Credit Score

Fortunately, you are not stuck with your current credit score. Various actions can increase your score, keep it stable, and open up new paths to success. If you are ready to boost your credit score, here are common strategies that will help you:

  • Get a credit card. Responsible credit card usage is a proof that you know how to manage your finances, so ensure you pay off that balance on time. If you can’t qualify for a credit card – either due to limited credit history or a low score – try to obtain a secured credit card or open a joint account with a family member who has good credit.
  • Pay your bills on time. Although this step won’t always improve your credit score, as most utility companies don’t deliver this positive information to credit bureaus. However, consistently failing to pay your bills on time will likely reduce your score.
  • Pay on your loans. For example, if you still have debt from taking out college loans, keep up with your monthly payments. If you miss payments, expect to see your credit score drop. Note that paying off your loans might result in a slight dip in your credit score. This tends to happen if you have no credit utilization aside from that specific loan.
  • Keep track of hard inquiries. A hard inquiry is when a financial entity – for example, a lender – asks one of the credit bureaus to share your credit history with them. You will need to authorize this action. A hard inquiry will bring your score down a few points. Sometimes the decrease is negligible. However, if multiple hard inquiries occur around the same time, you’ll likely notice the decline in your score. Avoid trying to apply for too many loans and credit cards in a short period.
  • Not all inquiries are ‘hard’. Soft inquiries result from instances when you check your score or a company checks it before offering you a ‘pre-approved’ credit card. These inquiries won’t affect your credit score.

Checking Your Credit Score for Errors

Sometimes errors find their way into your credit history and make your score appear lower than it should. Consider reviewing your credit history and reporting any errors you find. Your efforts might lead you to a higher score, so this is one of the best ways to achieve credit repair for free.

How to Conduct a Review By Yourself

  1. Visit AnnualCreditReport.com. The federal government authorizes this website to give you a free copy of your credit report on an annual basis. Be wary of scam sites that mimic this one.
  2. Complete the site’s request form. This will involve entering personal information, such as your social security number.
  3. Decide which report you’d like to review. You have three options because there’s one report available from each of the major credit companies – Equifax, Experian, and TransUnion.
  4. Download the report or opt to have a hard copy sent to you.
  5. Review the report for inaccurate entries. Look for errors in your personal information, account balances, and account statuses. You might also notice hard inquiries that were made without your consent.
  6. Dispute those errors by writing them down and submitting your findings to the relevant credit bureau. Include any accurate information that needs to replace the flawed data. If possible, include the paperwork that adds credibility to your corrections.
  7. Wait for the bureau to reply to you. You should receive a response within a month after the bureau has contacted the source of the inaccurate entry and requested a change.

Credit Repair Companies

If the thought of reviewing your credit report yourself seems daunting, you can find a credit repair company that handles the process for you. These companies offer to find and report any errors, but their services will come with a fee.

If you’re short on time and don’t mind paying the fee, a credit repair company might be the solution for you. However, be aware that some of these companies are scammers looking to collect your personal information and make money while doing so.

Best Practice: If you are not confident in your ability to detect scam companies, the best route is to review your credit history by yourself. This will require some of your time, but it’s less risky.

Beware of the Scammers!

Here are a few red flags to keep in mind while looking for a credit repair company. A scammer will:

  • Promise results by removing true, but negative information from your report.
  • Offer you a vague contract that does not mention details such as costs or a deadline.
  • Ask for payment before providing service.

Customer Notice

We strive to provide accurate information regarding personal finance and debt management, but it may not apply to an individual’s situation directly. This content is for informational purposes only and should not be considered as financial advice. PayDayAllDay.com won’t bear any responsibility in relation to personal decisions made based on it. You should consult your financial or tax advisor before making any financial decisions.
References and Sources

1. What is a Credit Score? Fair Isaac Corporation. Available at https://www.myfico.com/credit-education/credit-scores/

2. Fair Credit Reporting Act. Ftc.Gov. Available at https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-credit-reporting-act

3. John S Kiernan (2019). How to Check Your Credit Score for Free, in 2 Minutes. Available at https://wallethub.com/edu/how-to-check-credit-score/25503/

4. Hard vs. Soft Inquiries on Your Credit Report. Experian.com. Available at https://www.experian.com/blogs/ask-experian/credit-education/report-basics/hard-vs-soft-inquiries-on-your-credit-report/

5. How to Repair Your Credit for Free. Consolidatedcredit.org, Inc. Available at https://www.consolidatedcredit.org/free-credit-repair/

5. How to Repair my Credit and Improve My FICO® Scores. Fair Isaac Corporation. Available at https://www.myfico.com/credit-education/improve-your-credit-score

7. How Does Credit Repair Work? Credit.Com, Inc. Available at https://www.credit.com/credit-repair/

8. 5 Best Credit Repair Companies (2019) — Improve Your Credit Score. Available at https://www.badcredit.org/best-credit-repair-companies/