Clean Up Your Credit Report in 5 Easy Steps

Have you recently been turned down for financing or offered an astronomically high annual percentage rate? Maybe it's time to take a look at that credit report of yours. Like it or not your credit report—and credit score—has a lot to do with whether you'll get that new credit card or financing for that new car or house. It also determines whether your APR (annual percentage rate) will be reasonable or somewhere up in the stratosphere.

It's a good idea to check your credit report at least once a year because there's always the chance that something is there that shouldn't be—like that bankruptcy you filed 12 years ago that, by law, should have been removed from your credit report after 10 years. Or worse, it could show accounts that you never opened or lawsuits you had nothing to do with. If you do find errors and inaccuracies, here's what you can do to clean up your credit report.

1. Get a Copy of Your Credit Report

Get a copy of your credit report from all three of the credit bureaus (Experian, Equifax, and TransUnion) that issue credit reports. It's important to obtain all three because each report contains different information. Thanks to the Fair Credit Reporting Act (FCRA), consumers can get one free credit report every year from each of the three agencies. You can get access to the free reports at www.annualcreditreport.com. The credit bureaus also offer free credit reports directly on their sites, but usually they are bundled with an ongoing commitment for a paid credit monitoring service, so be sure to pay close attention when you look for your free report.

2. Make a Copy of the Credit Report and Circle Errors in Red

Make a copy of the original credit report scrutinize it carefully for errors and inaccurate information. Mark anything that looks suspicious. This can include credit card accounts that you closed but still appear as open on the report; accounts that you never opened; activity that you were not involved in; and account histories that show late payments when you know you paid on time.

Check your personal information including name, address, phone number, birth date, and Social Security number to make sure everything is accurate. Information regarding lawsuits, judgments, liens, late child support, or other late payments should be stricken from your credit report after 7 years and bankruptcies after 10 years. Credit inquiries from companies to determine eligibility for credit must be removed after 2 years.

3. Contact the Credit Bureau in Writing

If you find errors and inaccuracies, the next step is contacting the credit bureau in writing, preferably by certified mail with return receipt requested. The credit bureau may provide a form for reporting errors. If so, use that form and attach any supporting documents. Incorrect personal information and negative items like bankruptcies, lawsuits, and late child support payments that have remained on your report past the specified time period should be addressed with the credit bureau directly. For errors on specific accounts, contact both the credit bureau and the creditor.

Be as detailed as possible in your letter. Explain why you think there's an error and include a copy of the credit report with errors and inaccuracies circled in red. If you have any supporting paperwork, send that along as well. By law, the credit bureau must investigate the items you dispute and contact you within 30 days.



4. Contact the Creditor in Writing

If you are disputing information about a specific account, send a copy of your dispute to creditors as well. Again, send your letter via certified mail with return receipt requested and include the same documents and information you sent to the credit bureau.

5. Follow-up

If the information is found to be in error, that is, the creditor can't prove that the inaccuracy or error is correct, then it must be removed. You have the right to ask that the corrected version of the credit report be sent to any company that has requested your credit report in the past 6 months. The credit bureau must also send you a free copy of the corrected version.

Furthermore, under the Fair Credit Reporting Act, if the information found to be in error on your credit report is not removed and the court finds the violation intentional, you are entitled to actual and punitive damages, as well as court costs and attorney's fees.

The law is there to protect you and your credit. Don't wait until you're denied credit for a significant purchase to correct your credit report. A few hours spent reviewing your credit report now could save you much more time and aggravation later.