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How to Repair Your Credit History and Improve Your Credit Score

by Michelle Simms

If you’re thinking of buying or refinancing a home, make sure you repair your credit history before you apply for financing. Doing so, can speed up the loan approval process, plus lower your loan fees.

Repairing your credit history includes correcting false information, updating outdated items and adding missing details. If there is negative — but accurate — information in your file, it generally will drop off your records in about seven years. In the mean time, you should work on counteracting this information by updating positive items to your credit file.

Having a positive credit report is important because it’s one of the main factors lenders consider when approving you for a mortgage loan. Most lenders use credit scores to quickly and automatically judge if you’re a good investment. The higher your credit rating, of course, the greater your chances of getting the best interest rate for your home or refinance loan.

Understanding the Impact of Credit Scores

Credit scores, also known as FICO® scores, generally range from 300 to 850. Most lenders will work with you if your score is at least 620. If your rating is 720 or higher, they’ll consider you the most trustworthy type of borrower and offer you their best rates.

Your credit scores are based on the information in your credit report. This detailed consumer report tells everything about you, including where you work and live, how you pay your bills and whether you’ve ever been arrested, sued or filed for bankruptcy. Consumer reporting agencies (CRAs) or credit bureaus collect and sell your credit report to banks and other businesses.

Your payment history for the latest two years generally will determine your credit score. But technically, CRAs calculate your score using a closely-guarded mathematical formula. TransUnion, for example, determines credit scores using a variety of factors based on your credit and payment history, including:

o How you’re paying your accounts
o How much money you currently owe
o How long your accounts have been open
o What different types of credit you use
o How much credit you use compared to the amount of credit you have available

o How often and how recently you’ve applied for credit.

How to Repair Your Credit History

Your credit score is calculated using the information that’s available the same day your lender requests it. That means you can work on raising your score on a daily basis. You can obtain a copy of your credit report from any of the three major credit bureaus — TransUnion, Experian or Equifax — or you can get a three in one report from www.get3reports.com and handle this yourself. Or you can seek help from credit experts such as Credit Repair Whiz, a consumer advocacy company that helps educate and protect people from credit abuses and unfair practices.

Under the Fair Credit Reporting ACT (FCRA), CRAs and their information providers must work with you to correct any inaccurate or incomplete items in your credit report.

Here’s what it takes to start improving your credit file:

1) Tell the CRA in writing what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. Clearly identify each item in your report, state the facts and explain why you dispute the information, and request deletion or correction. Send your letter by certified mail, return receipt requested, so you can document what the CRA received. Keep copies of your dispute letter and enclosures.

2) CRAs generally must investigate the items in question — usually within 30 days. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so they can correct this information in your file. Disputed information that cannot be verified must be deleted from your file.

3) CRAs must make necessary repairs to all appropriate items. If your report contains erroneous information, the CRA must correct it. If an item is incomplete, the CRA must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the CRA must show that you're current. Or if your file shows an account that belongs only to another person, the CRA must delete it.

4) When the investigation is complete, the CRA must give you the written results. They must also give you a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice that includes the name, address, and phone number of the provider.

4) At your request, the CRA must send notices of corrections to anyone who received your report in the past six months. If an investigation doesn’t resolve your dispute, you could ask the CRA to include your statement of the dispute in your file and in future reports.

5) In addition, tell the creditor or other information provider in writing that you dispute an item. As with the CRAs, include copies (NOT originals) of documents that support your position. If the provider then reports the item to any CRA, it must include a notice of your dispute. In addition, if you are correct and the disputed information is not accurate, the information provider may not use it again.

6) If your credit file doesn’t reflect all your credit accounts, work on updating it. Most national department store and all-purpose bank credit card accounts will be included in your file, but not all creditors supply information to CRAs. Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those creditors that don't.

If you start improving your credit history today, you can look forward to having lower loan rates tomorrow.

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