New Year’s Resolutions: Clean Up Your Credit Report

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New Year's Resolutions: Clean Up Your Credit Report

It’s a new year, and once again we haven’t hit our goal for a down payment for a house. Medical bills and health insurance premiums have totally messed us up in the past twelve months, but that’s a story for another day.

It is, however, a new year, and with the turning of the calendar many people set resolutions and goals–a good many of those goals are financial.

With all of these New Year’s Resolutions, I wanted to point out another huge thing people should be doing as they save and prepare to buy a home. Of course, you need the capital for a down payment. You need it for closing costs, and to prove to the bank that you have enough of an emergency fund to not go broke if something needs to be repaired in your new abode.

But before you can even think about getting that mortgage, you need to know what’s on your credit report. Lenders will be looking not just at your credit score, but also at the line items on your report in order to determine how worthy you are of receiving their loan.

Anecdotes: Credit Report Errors Happen in Real Life

A few years ago I wrote about getting your annual free credit report. (You should not contact the credit bureaus; you should follow the directions in this post.) One of my readers followed through, and found out that her bank had her mortgage on there twice. It made it look like she had twice as much debt as she actually did. She took steps to remove it.

Michelle found out when she was an adult that someone had bought a house in her name when she was only thirteen years old. She had a heck of a time proving that she did not, in fact, make such a huge purchase before she was even legally an adult.

A few years ago, I myself found out that I had negative information on my credit report. It was a shock, as it was an issue I had already worked out with the billing institution. (It wasn’t even a loan.) I wrote a Goodwill Letter, explaining the circumstances, and requesting that it be removed as we had already resolved the balance. They obliged, but I am the only person I know of that has ever had success with this method.

How to Clean Up Your Credit Report

While we all were in different situations, each of us started by getting our free credit report. This is an important step that everyone should take, especially if you’re thinking about making a major purchase in the near future that will require taking out a line of credit.

After you get that report, finding errors can be a devastating blow. You now have to dispute the error with both the credit reporting bureau (Equifax, Experian, or TransUnion,) or, if it appears on all of their reports, you will have to dispute it with all three. You must write them a hard-copy letter, send it to them, along with copies of documents that support your position, and then wait 30 days for a response.

It may not come back in your favor. If it does not, you must request that your original letter remain attached to your account.

Next, you go to the information provider, who is the person or company that filed the inaccurate report. You must again write a formal letter of dispute, send it with copies of documents that support your position, and wait for the response. They may or may not agree with you, but at the very least they have to let the credit reporting company know about your dispute.

It’s a time-consuming process. It’s doable, but can be frustrating. Even if you don’t want to do it, cleaning up your credit report is something that needs to happen if you want to get a halfway decent rate on your next loan or mortgage, or sometimes even have a lender extend credit to you at all.

If the whole process seems overwhelming, there are companies out there that can help. You give them your information, and they take care of the entire process for you. They have professionals who deal with credit bureaus and information providers regularly, so they know how to effectively communicate and use the rules to advocate for you efficiently.

Finding the right company to trust with your information is critical. One company that I trust is CreditRepair.com. When I sat down with them to talk about their work, I already knew they had an A+ accreditation with the Better Business Bureau, but that meeting showed me the passion they have for helping people fix their credit, and through that, their lives.

They charge $99.95/month, with many of their clients having their issues resolved within a two-month time frame. More complicated problems or tougher disputes can take longer, however.

Ultimately, it depends on how much of your own time you want to invest. You can go the DIY route if you feel confident you can do a lot of research on your own, and have to patience to deal with both the credit bureaus and the information provider, even if they fight you. If passing that time and frustration to someone else is worth $99.95/month to you, looking into a reputable credit repair company may be a better option.

One thing is for sure: you need to clean up your credit report. Monitor it. When you find errors, take steps to fix them. That way when you go to apply for a mortgage you can focus more on things like down payments, closing costs, and emergency funds.

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9 thoughts on “New Year’s Resolutions: Clean Up Your Credit Report

  1. Mel @ brokeGIRLrich

    I actually had an error on my credit report years ago where it was listing one of my mom’s accounts as mine. So it was a high credit limit, but it was maxed out and very negatively effecting my credit score. It actually just took a few letters and it got straightened out and my score shot right up afterward, but I was lucky I had checked it sort of on a whim after being turned down for a rewards credit card. If I’d waited until I wanted to buy a house or when I applied to private student loans, things might have gone much differently.

    Reply
    1. Femme Frugality

      So good you checked! And so glad it immediately worked! From everything I’ve seen from the small sample size of people I know, which is completely anecdotal and should not be taken as sweeping fact, the people who have been victims of theft have a really hard time, whereas when it’s just your bank that made a typo, is been easier to resolve.

      Reply
  2. Gary @ Super Saving Tips

    With so much focus on finding out your credit score, a lot of people seem to forget that your credit report is important to check, too, especially when you’re planning to make a big purchase. I’ve been fortunate that I haven’t found any errors on mine yet, and I’m glad you were able to get yours resolved without too much hassle.

    Reply
  3. Amanda

    I really need to make this a priority in 2016. This is important and I’ve been avoiding it. I keep thinking that if I’m going to be debt free, I don’t need to worry about my credit score or report, but that is naive and lazy, frankly. I may buy a house, and the fewer glitches in the process the better, which means my report should be spotless. Thanks for the reminder and the suggestions on how to check it properly.

    Reply
  4. Hayley @ Disease Called Debt

    We’re in the same boat right now, saving up for a house deposit but concerned about credit scores not because of inaccurate information but because of our recent debt troubles. We’ll have a default on our file for the next 5 years (one year’s already passed)! Not much I can do about that, except keep on saving up in the meantime and try to repair the credit file by managing credit responsibly. Best of luck with your savings for a new home!

    Reply

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