Maintaining a clean credit history is important. Lots of things depend on having good credit. With bad credit, it’s tough to get a loan and when you do qualify, the interest rate is high.
The tool to hammer your credit history into the best possible shape is the Fair Credit Reporting Act. It sets the rules for collecting, reporting and altering information in your credit history.
The companies that collect and sell this information are called credit reporting agencies, or CRAs. The three biggest CRAs are Equifax, Experian and TransUnion. Before you can begin repairing your credit, you have to know what it looks like, so start by getting a free copy of your credit report from the three companies. You can get one free credit report, per year from all three by going to AnnualCreditReport.com.
Once you get your repor,t look for mistakes; they are common. In 2013, the Federal Trade Commission reported that one in five consumers had an error on at least one of their three credit reports. One in 20 had errors that could result in less favorable borrowing terms. So go over your report to make sure it’s all true. If it isn’t, fix it by going to the CRA’s website or sending a letter.
Eventually, negative information in your credit history will go away by itself, but not for a long time – seven years. You don’t have to wait years. You can get rid of negative things on your credit report anytime. The secret to fixing your credit history is writing a “goodwill letter” to each creditor who had reported a negative item asking them to remove it. Simply build a case that you should not have to suffer for years simply because you made a few mistakes, especially since you’re now a responsible citizen. If you had problems that caused the delinquencies way back when, say medical bills or you lost a job, explain that, but be honest about the information.
That Fair Credit Reporting Act allows you to include a brief explanation of disputed items. “Brief” means keeping the wording to 100 words or less, but don’t make excuses. Give explanations and resolutions. For example, for a late payment you could say, “Payment late due to lost mail. Account brought current immediately upon being informed.”
Fixing mistakes, asking for a break and explaining what you can are the only ways to improve your credit history. That’s why you should never pay anyone to repair your credit for you. There’s nothing any company can do that you can’t do yourself. So there’s no reason you should risk a ripoff or part with your money by paying for credit repair.