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How Can I Get Rid of My Bad Credit History?

Credit repair toolsGetting rid of bad credit for free is possible, but not quick. It will take time. However, you can shorten the time frame with a few techniques. Here are a few tips to improve your credit quicker:

1. Obtain a copy of your credit report from all three credit bureaus, Transunion, Equifax, and Experian. If you see any errors, dispute the errors. The process is simple enough, unfortunately, so many people take this path, that the process is not as smooth as people would like. If you have a problem challenging the credit error(s), contact the Consumer Financial Protection Bureau. Credit disputes can be made online.

Credit dispute portals

Equifax dispute page
Transunion dispute page
Experian dispute

2. Start paying or continue to pay your bills on time. Your payment history represents 35% of your credit score. If you have late payments on your credit report, contact the creditor and ask the creditor to remove the late payment(s). You may find that the creditor just may hit the magic button on his or her keyboard and knock off the late payment(s).

3. Don't close any unused credit card accounts. Credit history matters; a longer history is advantageous. Length of credit history represents 15% of the credit score. Pay down . . . don't close.

4. Credit utilization comprises 30% of your credit score. Credit utilization is a ratio (balance) between the available credit amount and the amount of money that is owed. For example, if your credit limit on a credit card is $1,000 and the balance is $500, the credit utilization is 50%. The formula is simple enough, just divide the amount owed, $500 in this example by the credit limit ($1,000). If you owed $1,000 with a credit limit of $1,000, the utilization ratio would be 100%. The credit algorithm (formula) desires a debt balance of 30% or lower. In the previous example, the ideal debt obligation would be 30% or $300. Owing less is better. Don't be tempted to pay off one credit card and then move to the next card. Just reduce the balances on each card; and don't close the credit card(s). One way to improve your credit utilization percentage is to ask the creditor to raise your credit limit. By increasing the limit, the percentage owing becomes less. Use the Credit card utilization calculator to analyze your utilization ratio.

5. Credit mix comprises 10% of the credit score. A car loan, credit card(s), and installment loan altogether is viewed favorably.

6. Obtaining new credit costs 10% of the credit score. Applying for several accounts in a short period of time can affect your score.

Here's the credit score calculation:

  1. Amounts owed (30%)
  2. Payment history (35%)
  3. Length of credit history (15%)
  4. Credit mix (10%)
  5. New credit (10%)

Increase your credit score with rapid rescore

Do you know about the Rapid Rescore Program? Rapid Rescore is a method used by lenders to obtain an updated credit report. For example, if you paid off a collection account(s) and and/or paid down on your credit card balances and want a revised credit score quickly, the Rapid Rescore request to the credit agencies will provide the lender with an updated credit score and credit report. The usual time frame is 30 to 60 days for an updated credit report and revised credit score, but with Rapid Rescore, the revised credit report, and the score can take as little as 7 business days. Read more

Conclusion

  • Pay your bills on time
  • Don't close your credit cards or other revolving accounts, but pay down to30% or lower on the credit limit.
  • Refrain from seeking new credit.

Rotating question markFrequently Asked Questions About Repairing a Bad Credit History

Q. Does paying off collections improve credit score?
A. The credit score may improve, maybe, depending on the scoring model used by the lender.

 Q. Are foreclosures and bankruptcies impossible to remove from the credit report?
A. There is no type of negative listing that has not been repaired and removed from a credit report including tax liens and judgments. Although, some negative items, such as unpaid debts, or bankruptcy, are more difficult to repair and remove from the credit report.

Q. Can I start over with a clean slate if I declare bankruptcy?
A. Yes and no. When you file bankruptcy and the judge approves the bankruptcy, the credit accounts that you filed against will be listed as "included in bankruptcy" item. The bankruptcy discharge listing will appear in the court records section of the credit report. If possible, bankruptcy should be avoided and used as a last resort.

Q. Can I file a "100'word statement" on my credit report and will the creditors consider my side?
A. Creditors do not usually consider the information in a one hundred-word statement. The statement may make you feel better, but it is unlikely to make any difference. Computer programs that analyze, income, debt, and most importantly, your credit score, make most credit decisions. Computers do not read or take into consideration-100-word statements.

Q. Can credit bureaus be fooled by changing my social security number(s) or by using an EIN tax number?
A. Some credit repair companies have marketed a scheme known as "file segregation". The scheme is complicated and requires a change to nearly all-identifying information. File segregation is a dangerous path to take-to-take to repair bad credit. Some people have been charged with crimes, or terminated from jobs, for providing false information. Lying about any personal information on a credit application is usually a federal crime. Using these "file segregation" should be avoided.

Q. Do the creditors have to remove a bad credit listing if they fail to respond within 30 days?
A. The credit bureaus will delete a negative listing when they have not heard from the credit grantor after approximate