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Credit Report & Scores

Your credit report is like a report card on your financial skills and behavior. It tells others how you use credit and if you meet your financial obligations in a timely manner.

If your credit report contains negative information, your overall grade (or credit score) will be lower than average. That can complicate your life. You may find it harder to qualify for a mortgage, car loan or other form of credit. If you do qualify, you'll pay more for the loan than someone with a good credit report.

Lenders aren't the only ones that use credit reports to judge a person's financial integrity. Employers, rental agencies, utility providers, even insurance companies, may view your credit report before making a decision about you.

So, what's a poor credit "novice" supposed to do? Take heart! It is possible to improve your credit report. It won't happen overnight and it will take determination, but you can raise your credit score and improve your creditworthiness.

First, you should review your credit report to make sure it's accurate. Second, you need to do a better job of managing your credit. Finally, don't make your situation worse by falling for a "quick, easy" fix. Our Consumer Credit Counseling Services (CCCS) agency can help you find the best way to start this process. Follow our tips below to get yourself on the right track to improving your credit report and improving your creditworthiness over time.

Review your Credit Report

You have the right to obtain a free copy of your credit report each year from the three major consumer credit reporting agencies (Equifax, Experian and TransUnion). The easiest way to obtain your credit report is to visit the authorized website — www.annualcreditreport.com — or call 1-877-322-8228.

Carefully review your credit report. Does it accurately reflect your bill payment record? Do all of the listed accounts belong to you? Is any information out-of-date?

If you find an error, you have the right to dispute it. Refer to your credit report for instructions. Keep copies of your dispute letter and any enclosures (like receipts or billing statements), and send the packet by certified mail with return receipt.

The credit reporting agency is required by law to investigate your complaint and send you a prompt written response. It must correct any inaccurate information, and send you a copy of your changed report.

If the credit bureau's investigation does not resolve your concerns, you are entitled to tell your side of the story. Submit a brief statement about the matter, which the credit bureau must attach to your credit report. This information will be made available to lenders, potential employers or others who request your credit file.

If you are denied a loan, insurance, employment or other benefit based on your credit report, the company must tell you the reason and the name of the credit bureau. If their action was based on incorrect information, contact the credit reporting agency immediately.

Do a Better Job Managing Your Credit

Once you've verified that your credit file is accurate, it's time to look at your behavior using credit over time. If your credit score is lower than you'd like, consider how you manage your debts and take corrective action.

The following tips will help you, over time, to improve your credit profile.

  • Pay all of your bills on time. That means being organized and not shoving unpaid bills into a drawer. Mark on the envelope when the bill is due and mail your payment at least five business days before the due date. Another option is to sign up for automatic bill pay. This way you will never miss a due date.
     
  • Pay down and pay off credit card balances. Pay more than the minimum monthly payment, whenever you can. Aim to pay off balances as soon as possible, tackling the loans with the highest interest rate first.
     
  • Keep accounts open. Don't close unused or paid-off accounts, particularly if they offer a large line of credit. This could negatively affect your credit score. Just be sure not to run up any new charges.
     
  • Refrain from opening new accounts. Your goal is to keep your debt level manageable. Maintain a small number of credit cards (preferably one) and keep balances low or at a zero balance, if possible.
     
  • Contact your creditor immediately if you will miss a payment. If you can't pay your bills on time, work out a manageable payment plan with the creditor and stick to it!

Don't Make Your Situation Worse

As suggested, you can improve your credit profile on your own, over time, for little or no expense. You don't have to pay a fee to a suspect business that promises an "easy fix."

Avoid credit repair companies that "guarantee" they can remove late payments, bankruptcies or other negative info from your credit report. If you have made late payments and filed for bankruptcy before, that information is accurate and will not be removed from your report. It is illegal to claim that you can remove accurate information from someone's credit report.

Any company that advertises it can create a "new" credit report or establish a "new" identity for you is not being truthful! Don't believe their false promise to get you an Employer Identification Number or a new Social Security Number. Obtaining either identification number under false pretenses is a crime.

For safe, trustworthy assistance in regaining control of your credit, contact our Consumer Credit Counseling Services (CCCS) agency at 1-877-ASK-CCCS, we are a non-profit credit counseling agency providing certified credit counselors who can help you to analyze your credit report and teach you how to correct errors. If it is appropriate for your specific situation, we can also offer a Debt Management Program (DMP) to assist you with repaying your debt, obtaining a higher credit score over time, and gaining financial freedom.