6 Ways to Clean Up a Bad Credit Report

If you have a bad credit score, it’s almost certainly tied to one or more black marks on your credit report. Understanding how to go about cleaning up your credit report can help put you in a better financial position. In this article, we’re going to provide you with six specific tips.

1.Review Your Credit Reports for Inaccuracies

The first step in cleaning up your credit report is to know what’s on it. You need to get copies of your credit reports from the three major credit bureaus: Equifax, Experian, and TransUnion. You’re entitled to one free report from each bureau every year through AnnualCreditReport.com. Once you have your reports, go through them carefully. Look for any inaccuracies, including incorrect personal information, accounts that aren’t yours, or mistakes in your payment history.

If you find any errors,  dispute them with the credit bureau. Each bureau has an online process for disputes, but you can also write a letter explaining the mistake and providing any supporting documents. The credit bureau has 30 days to investigate your dispute and must correct any errors. 

2. Negotiate with Creditors

Sometimes, you can clean up your credit report by negotiating with your creditors. If you have outstanding debts, try contacting your creditors directly. Explain your situation and see if they’re willing to work with you. Here are a couple strategies you can use:

• Pay for Delete: Offer to pay off the debt in exchange for the creditor removing the negative entry from your credit report. Not all creditors will agree to this, but it’s worth asking.
• Settlement: If you can’t pay the full amount, ask if the creditor will accept a smaller lump sum payment to settle the debt. Make sure to get any agreement in writing, stating that the debt will be marked as “paid as agreed” or “settled” on your credit report.

3. Pay Down Outstanding Balances

One of the most effective ways to improve your credit score is to pay down your outstanding balances. High balances can hurt your credit score, especially if they’re close to your credit limit. Start by focusing on the debts with the highest interest rates, as these are costing you the most money. Once those are paid off, move on to the next highest, and so on.

If you’re struggling to make payments, consider a debt repayment plan. You can try the snowball method, where you pay off your smallest debts first to build momentum, or the avalanche method, where you tackle the highest interest debts first. (Whichever method you choose, be consistent and try to make more than the minimum payment whenever possible. Reducing your overall debt will help improve your credit score over time.)

4. Work With a FCRA Attorney

Depending on your situation, you might find it helpful to hire an attorney to help you determine if your rights have been violated.

“The Fair Credit Reporting Act or FCRA is a federal law that regulates the collection of consumer credit information and access to credit reports,” attorney Jibrael S. Hindi says. “This federal law governs the collecting and reporting of consumer credit info, including how the credit bureaus may obtain the information, for how long they may keep it, and how they can share it with other entities.”

If nothing else, an attorney can look into your situation and determine whether any FCRA laws have been broken. Consider this option, if you’re having difficulties cleaning up your report on your own.

5. Establish Good Credit Habits Moving Forward

Cleaning up your credit report isn’t just about fixing past mistakes – it’s also about building good credit habits for the future. Here are some good habits to hone:

• Pay Your Bills on Time: Your payment history is a significant factor in your credit score. Always pay your bills on time, even if it’s just the minimum payment. Set up automatic payments or reminders if you need help staying on track.
• Keep Your Credit Utilization Low: Try to keep your credit card balances below 30% of your credit limit. High credit utilization can hurt your credit score.
• Avoid Opening Too Many New Accounts: Each time you apply for credit, it results in a hard inquiry on your report, which can lower your score. Only apply for new credit when necessary.
• Diversify Your Credit Mix: Having a mix of credit types (credit cards, installment loans, etc.) can be beneficial. However, don’t take on new debt just for the sake of diversifying.

6. Consider Professional Help

If you’re feeling overwhelmed by the process of cleaning up your credit report, it’s definitely worth getting some professional help. Credit counseling agencies can offer guidance and support. They can help you create a budget, develop a debt repayment plan, and negotiate with creditors.  If you do go this route, make sure to choose a reputable agency that’s accredited by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA).

Another option is to work with a credit repair company. These companies can help you dispute inaccuracies on your credit report and negotiate with creditors. However, be cautious and do your research, as there are plenty of scams out there.

Don’t Let Your Bad Credit Report Fester

A bad credit report isn’t going to magically get better on its own. In fact, it’ll usually get a lot worse if you don’t do anything about it. The important thing is that you take consistent, proactive steps today to erase some of the black marks on your report and begin elevating your score. You can’t do it overnight, but with the tips outlined above, you can start making progress!