If you have had trouble with credit in the past, chances are you would benefit greatly from cleaning up your credit report. Saving money on credit cards, mortgage payments and auto loans are just a few of the benefits that you will enjoy by having a higher credit score. But where do you start? If you have found yourself asking this very question, you have found the right article. In the next few paragraphs, I'll provide you with a simple outline to clean up your current credit report in no time.
So why would I want to clean up my credit report?
Although there are several ways to answer that question, it really all comes down to money – the ability to borrow money, save money, spend money and pay back money are all reflected in your credit report. If there are negative items plaguing your current credit records, they are likely preventing you from getting the best interest rates and deals on a wide array of financial services. Your credit score is based on the individual records in your current credit report.
Banks and financial institutions use this score to gauge an individuals propensity to pay back debt. If items on your credit report are causing you to have a low credit score, it is unlikely that you will qualify for the best financing available. In fact, a messy credit report can even prevent you from getting hired at your dream job, as most employers these days check potential employee's credit files.
So how do I clean up my credit report?
First, you'll have to identify the items that are hurting your credit score. Obtain a copy of your credit report to find out exactly what is included in your credit records. Once you have identified the problem areas, you can work to resolve them. A copy of your current credit records can be easily obtained through many different online services, or directly from the credit reporting agencies themselves.
Next, you should work to pay off all outstanding collection accounts and debts. You don't have to settle up all of your credit cards immediately. You should, however, make an effort to pay down your balances to less than 35% of the total available credit line. If you have collection accounts that are unpaid on your current credit records, plan out a schedule to pay them off over a predetermined period of time.
In addition to paying off collection accounts and controlling your debt, you should cease applying for any new lines of credit. If you have lines of credit or credit cards that are less than six months old and are not required for emergencies, you should consider closing these accounts. Be sure to keep your older credit cards and revolving lines of credit, as old accounts with good payment histories have a positive effect on your credit score.
Just like anything else, there's a right way and a wrong way to clean up a credit report. Forget hasty recommendations to just cut up all of your cards and throw them in the trash, as this will work against your efforts to clean up your report. Follow the simple steps outlined in this article and you will see positive results before you know it.