When it comes time to finance a home or a car, your credit report will have a huge say in the matter. Even for small loans and lines of credit, your credit history can affect everything from loan amount to interest rate.
But if you have bad credit, where does that put you? Are you out of luck? Can you fix it?
How to Clean Up Credit Reports
Fortunately, there are ways to learn how to clean up credit reports. The key is committing to improvement. It takes discipline and sacrifice to turn your finances and credit score around, but it’s entirely possible.
Keep reading for a step by step guide on how to clean up credit reports.
1. Understand Your Credit Report
First, you must take the time to understand your credit report. What is in your credit history that’s hurting your score?
You are entitled to a free credit report from each of the three credit bureaus once a year. We recommend getting a report from one at a time, every four months, rather than getting all of them at once, one time a year. Get your report from TransUnion, Equifax, or Experian and to thoroughly review your score.
2. Dispute Any Errors
Nobody is perfect, nor is any entity. There may very well be mistakes in your credit report hurting your standing. In this case, you must dispute any errors you find to get those negative marks off your report.
You can find professional credit repair software, such as DisputeBee, which will automate the entire credit dispute process.
3. Don’t Leave Credit Lines Maxed Out
Another tip in learning how to clean up credit reports is learning how to manage your lines of credit. A maxed our credit card or revolving credit account suggests that you know how to spend money that isn’t yours, but struggle to pay it back.
However, even if you pay off credit cards, don’t cancel them. Having credit available to your name, even if you owe nothing on the account looks credit and helps boost your credit score.
4. Improve Your Debt to Income Ratio
In the same way that credit bureaus look at your lines of credit to see if they’re maxed out, they’ll also look at your budget. Learning how to clean up credit reports also means learning how to live below your means.
However, it will take some discipline, as 78% of Americans live paycheck to paycheck. When paying your bills each month depends on the next paycheck, it means you’re teetering on the edge of total indebtedness. One financial emergency can push you over the edge.
Downgrade your car, downgrade your home, cancel unnecessary memberships and subscriptions, etc. Do what it takes to significantly improve how much money is coming in versus what is going out.
5. Take Care of Any Past-Due or In-Collections Accounts
Finally, you need to take care of any major red flags on your credit report. Past due accounts and accounts that have been turned over to collection agencies are some of the worst smudges on your credit report. It shows the credit bureaus that you’re irresponsible with money and don’t pay your bills.
Do what you have to to get those accounts cleared as soon as possible.
If learning how to clean up credit reports is important to you, so is personal growth, financial accountability, and business success. Take a look at the rest of our articles before you go for the best information and advice!