In order to obtain more favorable terms on a loan, a potential borrow should work to erase bad credit from a credit report. Though erasing bad credit history in its entirety is not possible, with some work one can substantially improve a credit score. Even small improvements can substantially affect the terms of a loan or whether or not a loan application is denied. The following steps will teach a potential borrower how to erase bad credit.
The first step in erasing bad credit is obtaining a full credit report. Though many people are aware of their credit score, without the itemized credit report little can be done. AnnualCreditReport.com allows individuals one free copy of their credit report from each of the sponsoring companies annually. The site is sponsored by the three major credit companies in the United States, TransUnion, Experian, and Equifax. Request reports from all three companies to ensure all three are accurate and that any discrepancies are cleared immediately.
Upon obtaining the three credit reports, examine each line item for accuracy. Credit scores are based on a number of factors including mortgage, credit card and other loan payment history. Other factors include the number of loans held, the number of times credit checks have been run and any history of defaults, bankruptcies or late payments. The federal government maintains that bad credit cannot be erased if the information on the report is factual. However, if the report does not reflect an individual’s true credit history, a request can be made in writing to have an item expunged from the report.
Be aware of some of the most common sources of discrepancies in credit reports when examining your own documents. Those that have been victims of identity theft should make sure that fraudulent charges have been removed. Accounts that are closed but have been paid in full may be removed from a report. If late or defaulted payments are listed twice, one may be removed to reflect payment history accurately. Many credit inquires are detrimental to credit scores, and any inquires that were not authorized should be removed as well.
The credit bureau must be notified in writing of any items the borrower wishes to dispute. Be ready to supply documentation in support of your claim. If the claim is found to have merit, the item will be removed and the credit score adjusted.
The Federal Trade Commission urges consumers to wary of companies who specializing in “erasing bad credit.” While the process of cleaning up a credit report can be time consuming, under the Fair Credit Reporting Act it has become more transparent and can be completed at no cost.
After resolving any credit disputes and erasing bad credit report items, work to repair bad credit that remains. Make sure that payments on all accounts are up to date and pay down any credit cards that have reached their limit. For any accounts that have been sent to a collection agency, work with them to structure a payment plan. Though it is impossible to erase bad credit completely, much can be done to improve it.
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