How to Clean Up Bad Credit

As a result of the sub-prime credit and lending crisis, lenders are demanding a higher credit score to approve new credit. So, it is more important than ever to clean up any bad information on your credit reports. Below are three easy and simple steps to cleaning up your credit report.

The First Step to Clean Credit
The first step to cleaning bad credit is to get a copy of your credit report from all 3 credit bureaus: Experian, Equifax and Transunion. Every year you are entitled to one free report from AnnualCreditReport.com.

Alternatively, you can get all three reports plus your scores for $1 here. Otherwise, you can request a copy in the event you have recently been denied new credit.

The Second Step to Clean Credit
Identify credit information that damages a good credit score. This includes...

  • collections
  • late payments
  • repossessions
  • charge offs
  • bankruptcy
  • judgments
  • included in bankruptcy
  • garnishment
  • paid for less
  • settled accounts
  • liens
  • 'hard' inquiries

Recent negative items are more damaging than older items.

The Third and Final Step to Clean Credit
Any questionable information must be disputed and deleted as soon as possible. It may take up to 60 days or more to fully resolve credit errors so it is important to get started as soon as possible!

What Can You Legally Dispute?
Bankers and credit bureaus may intimidate you and prevent you from disputing questionable information on your report. However, this is in direct contradiction to State and Federal Courts who apply a liberal standard to what is "inaccurate."

In other words, perhaps you technically were late on paying your credit card bill. However, it may have been due to the credit card company sending your invoice to the wrong address or failing to send your monthly statement.

Here are some additional reasons to support your credit report dispute:

  • the account does not belong to you
  • the item is out-of-date
  • you were never late
  • you agreed to an alternative payment plan
  • the account was sold in violation of the contract
  • the balance is wrong

We suggest that you file your disputes by certified or registered mail.

Cleaning up a bad credit report is possible and 100% legal. However, it does require persistence, patience, and an understanding of the relevant State and Federal credit laws.