5 Steps to Clean Up Your Credit

For many Americans, credit only becomes important when it’s time to make a purchase or request a loan. However, at that point, it may be too late to fix any major problems and still secure the loan.

You should take a look at your credit annually just to maintain and monitor it, the same way you annually check your health. Consider your annual credit check as preventative care for your financial health.

5 Steps to Clean Up Your Credit


1. Pull Your Reports

The first step, if you want to clean up your credit, is to know your score or what is in your credit reports. Pull them from the three major credit reporting bureaus: Experian, Equifax, and Trans Union. You can start by going to www.AnnualCreditReport.com; it’s free to download all three reports once a year, but your scores must be paid for separately, if you want to see them.

2. Check for Errors

Once you have each report in hand, make sure that the debts listed all belong to you. Go through each one to make sure the balances are correct and that the payment history is up to date. Once you have a list of any accounts that either don’t belong to you or have errors, you’re going to want to file a dispute with each reporting agency directly. Creditors have 30 days to prove a debt is valid. If they do not respond or provide proof, you can request the debt be removed from your report.

3. Call Your Creditors

Any debts that are proved valid–such as public records, collection accounts, or any other debts–must be paid. There is no shortcut or quick-fix. Anyone who tells you they have the ability to cancel valid debts if you just pay them a certain amount of money is leading you down a slippery slope–don’t believe them.

4. Negotiate

Debts that haven’t been paid on in some time may have the option to negotiate the amount due. So, instead of paying the full balance, a creditor may extend a better offer, such as a settlement to just collect something on the debt and then close the account. This is totally valid and legal, however it is at the company’s own discretion and will not cancel the debt all together.

5. Make Payment Arrangements

Lastly, once you’ve negotiated with creditors, you’ll want to set up payment arrangements. Whether you pay them in one lump sum or make payments over time, you will start to see slight increases in your credit health and overall credit score.

Check out this overview below: