Remove Bad Credit
It doesn’t have to be this way, though. With a little homework and effort, you can nip your bad credit in the bud. The first step? Addressing the negative items on your report.
How to Remove Negative Items from your Credit Report
Step 1: Review Your Credit Report
Man using his computer
Before anything, you want to obtain a copy of your credit report. The good news is, it’s free, and it’s as easy as navigating to AnnualCreditReport.com and requesting it. You’re allowed one free copy of your credit report each year from each of the three major credit bureaus: TransUnion, Equifax, and Experian. It’s important to keep an eye on all three, because sometimes there are discrepancies between them. For instance, your Experian credit report might have an error while your TransUnion and Equifax reports are perfectly accurate.
Once you get your copy, you’ll find an entire section dedicated to any and all negative items. These are the accounts dragging your credit down: outstanding credit card debt or an old utility bill you never paid, for example. These negative items are the accounts we want to fix.
According to Experian, here’s how long six common negative items stay on your report if you aren’t able to remove them:
- Collection accounts: seven years after the first delinquency
- Late payments: seven years from the first late payment, even if you’ve caught up and the account is current or closed
- Chapter 13 bankruptcy: seven years
- Chapter 7 bankruptcy: 10 years
- Paid tax liens: seven years
- Unpaid tax liens: 10 years
Step 2: Look for Errors and Dispute Them
Once you’ve reviewed your potentially negative items, first make sure there aren’t any mistakes. There are a handful of different types of errors you should look for on your report:
- Accounts that don’t belong to you
- Negative items that have expired but haven’t yet dropped off the report
- Personal information errors
- A paid off account that’s still listed as unpaid
If you do find an error, you’ll first want to notify the creditor. The Federal Trade Commission makes the process really easy with this sample letter. Fill in the blanks, then send the letter to the creditor, along with any documentation supporting your dispute. They’re obligated to investigate the items in question, usually within 30 days. If they agree that there’s an error, it’s their job to notify all three credit bureaus so they can fix your report. You can also request to have them send notifications to any agency that’s pulled your report within the past six months.
What if the account is already in collections?
In another scenario, let’s say you’ve successfully disputed an item with the creditor, but they’ve already sent your info to collections. A debt collection company keeps calling you, asking you to pay money you don’t owe. If this happens, you can actually file a complaint with the Consumer Financial Protection Bureau.
Step 3: Try Removing Negative Items that Aren’t Errors
On the other hand, let’s say you’ve made some mistakes. You couldn’t afford to pay your credit card bill. Your student loan payments are sometimes late. Of course, the ultimate solution is to improve your financial habits; that much is obvious. In the meantime, though, you still have options for dealing with the negative items on your report.
For late payments, you can draft a “goodwill letter,” which is sometimes referred to as a “goodwill adjustment.” If you generally have a good history with a creditor, they’re often willing to forgive a late payment here and there and update your credit report accordingly. You’ll want to contact the creditor directly, either with a phone call or a letter. Either way, your request should include: