Your credit score affects different areas of life — borrowing, renting, insurance, and even employment. There are many reasons and ways to raise it. Here is your ultimate guide to repairing the score in 2021.
The easiest way to fix your status is to hire one of the major credit repair firms — companies specialized in score increase. They will check your records, find inaccuracies and dispute them formally, while you can simply monitor the progress. Alternatively, you may repair your credit score on your own. Here is how to do it.
What Is a Good Score?
The general FICO range is from 300 to 850. You can check your total on www.myfico.com, or in apps like Credit Sesame. It must be between 670 and 739 to be ‘good’, and between 740 and 799 for ‘very good’. Anything higher is ‘exceptional’. Note that different lenders have different minimum requirements. These also depend on the type of loan. For example, mortgages insured by the government allow a lower threshold.
Finally, some institutions may use another type of calculation — VantageScore. The differences, however, are minor. Both systems rely on a similar combination of factors. They consider your prior payments, level of debt, age of history, type of accounts, and inquiries.
Conditions for Repair
The term ‘repair’ refers to score increase through correction of reports. It implies that data from one or more major bureaus (TransUnion, Equifax, and Experian) is flawed. Sadly, this happens quite often. According to statistics, one in five Americans has one or more mistakes on their records.
If this is the case, you may prove the deficiencies and correct them on your own. This requires opening formal disputes with the respective reporting agencies. By law, every US citizen has a right to do this, and the institutions are obliged to respond.
1. Collecting Data
First, you need to understand whether there is anything to repair. Go to www.annualcreditreport.com and request a copy of your records from all three major agencies. You do not need to contact them individually.
Download reports from Experian, Equifax, and TransUnion at once. Now, you have enough data for your investigation. It is also possible to call the organization or send a written request. The results will come in 15 days.
Now, scrutinize the documents line by line. Mistakes may range from false entries to minor inaccuracies like misspellings of addresses. Note, however, that correcting the spelling will not get you anywhere —- the score will be the same.
Different items have different lifespans. Most derogatories stay on your reports for 7 years, and some types of bankruptcies tarnish it for a decade — depending on the chapter filed. You may find that some of the negative items will soon age off the records.
Consumers may debate any mistakes, but you may prioritize them based on the damage. Later, when you compose your dispute letters, it is preferable to include 3-4 mistakes in each. You can start with the worst ones.
3. Preparation of Evidence
You cannot demand deletion unless you have evidence to prove that the items are false. This may include bank statements and other documents obtained from your lender. If your proof is unconvincing, the agency will request additional information, which will prolong the process. Therefore, be thorough.
4. Initiating Disputes
Dispute letters have a special format, and you can find templates on the website of the Consumer Financial Protection Bureau. Send your correspondence by certified mail to have hard evidence of the exchange. After the agency or agencies receive your letters, they have 30 days to investigate each claim. They will contact your lenders to establish the truth.
5. Waiting for Results
Eventually, the bureau may accept the changes, reject them, or request more information. In case of a positive outcome, you will receive a free copy of your amended report by mail. The score will rise as soon as the mistakes are eliminated.
What if you find that the score is fair? In this case, you need more time to remedy it. The methods include working with the credit utilization ratio, adding more data to the Experian report, and becoming a more conscientious borrower overall.
The utilization ratio shows how much of your available revolving credit is in use. It is a proportion of balances against the total limit. For example, if you have five credit cards with a collective limit of $10,000, and you have spent $5,000, the ratio is too high — 50%. Ideally, it should be kept under 30% or 10%, depending on who you ask.
This indicator is raised by paying off or reducing the balances, or expanding the limits. For example, if you increase the limits on existing cards, or get a new one, the amount of available credit will grow, and the ratio will fall. If you do not qualify for standard cards, get a secured one instead. It is easier to qualify for as it requires a deposit.
You may also combine these methods with the repair. Working on both fronts will help you to achieve the desired results faster. Alternatively, hire a reliable credit fixing company. It will repair the score for you by communicating with bureaus, lenders, and collection agencies if necessary. This is the most efficient way to get a boost.