Fixing Your Credit Problems

Even small credit issues can have an outsized impact on your life. Luckily, though, many people's credit problems stem from incorrect information on their report and others come from minor issues which can be easily dealt with. Here is a process to start getting your credit mended.

1. Get a copy of your report from all three bureaus

The easiest and cheapest way to do this is to visit https://www.annualcreditreport.com which is the official site set up by the three bureaus -- Equifax, Experian, and TransUnion -- to let you get a free report once a year. If you have already gotten your free report for the year, you can still get free copies of your credit report if it was used to deny you credit, or you can pay for a report from the individual bureaus' websites.

2. Review your report for errors

One in five credit reports contain errors, so carefully look over your report for errors. If you find any, you can dispute them by sending a letter to the credit bureau. Send the letter via certified mail so that you have proof of when it was sent. If the bureau cannot confirm the item within 30 days, they will have to remove it from your report. Although you should not send fradulent disputes, if you are unsure about an item, it is in your interest to dispute it since it may end up getting removed or, worst case, will just remain on your report.

3. Fix Legitimate Issues

If you have past due accounts or collections, you are probably going to need to do something with them. Consider a "pay for delete" offer. With this, you offer to pay the debt, or some portion of it, in exchange for the collection agency's promise to completely delete the account from your credit report. They get paid, and the derogatory item disappears from your report. A sample letter is available online at http://credit.about.com/od/debtcollection/a/payfordelete.htm.

4. Wait

The other solution to credit problems is to wait. Most credit issues will drop off of your report after seven years. As such, if your problems are nearing that date, you may just want to wait for them to go away of their own accord.

5. Pay Your Bills On-Time and Pay Your Balances Down

Once you have cleaned up your credit, you should keep it clean moving forward. Always pay your bills on time to prevent new derogatory items from landing on your credit report. Pay as much as you can to get your balances down as far as possible. People with top scores typically use less than one-third of their credit limits.

Pay as much as you can to get your balances down as far as possible

by Answers.com Author, Finance writer