Sometimes, no matter how hard one tries to make bill payments on time and to avoid excessive debt, bad credit happens. Everyone with a credit record also has a credit score and lenders use these scores to determine loan rates and possibilities. A higher score is better than a lower score.
Loan officer and Great Plains Federal Credit Union manager Elizabeth Wine said cleaning up bad credit is imperative to raising a lending score to acceptable status.
“The first thing one needs to do is go to one of the credit bureaus online and get an up-to-date credit report,” Wine said. “Then start with the most recent entries and try to clean them up.”
Wine suggested writing letters to entities noted on the credit report, starting with the most current entries.
“The most recent marks are the most important,” she said. “Older credit infractions do not carry as much weight for the lender.”
Many financial advisers suggest that individuals review their credit scores at least once a year. While federal law requires lenders and other companies to provide accurate information to credit bureaus, mistakes do happen.
Wine said that people should check to make sure their credit rating accurately reflects bill payments. It is also important to verify that the accounts listed are accurate, especially if relatives share common names.
“Credit scores can be raised by closing unnecessary credit card accounts,” Wine said.
When a person detects a mistake in his or her credit report, the best way to fix them is in writing. Credit bureaus are required to investigate written complaints within 30 days of receipt of letter. The law also requires the source of inaccurate information to correct the record at all three main credit bureaus.
“Credit reports do not fix themselves,” Wine said. “It might take a little bit of hard work and effort, but anyone can better their credit score by simply checking and following up on problems.”
Credit scores play a big part in determining if lenders will support a loan request. Other factors they consider are the amount of manageable debt and cash flow.