Can I Clean Up My Credit Report by Myself?
Reader question: “I have a few things on my credit report that I’d like to remove. I was thinking about hiring a company to help with this. But I’ve heard good and bad things about these companies. Is this something I can do on my own? If so, how can I clean up my credit report by myself?”
Yes, you can absolutely do this on your own. That’s what I recommend. The industry you are referring to is full of bad apples. In many cases, they will charge you an upfront fee and then fail to deliver anything of value. Or they’ll charge you for things that you could easily do for yourself. So let’s talk about how you can clean up your credit report on your own.
How Credit Reporting Works
To understand what it takes to clean up a credit report, you first need to know how the reporting industry works. If you’re already familiar with this, just skip ahead to the next section. Otherwise, this is a great place to start.
You can think of your credit reports as records of your past financial activity. You have three of them, because there are three reporting companies in the United States — TransUnion, Equifax and Experian. They are also referred to as credit-reporting agencies, or CRAs for short. I don’t like the “agency” word, though, because it makes them sound like government entities. Make no mistake. These are not government agencies. They are profit-driven corporations. Why are there three of them? Because there’s a lot of money to be made in this industry.
So when you attempt to clean up your credit report, just remember that you may need to do it three times. It’s possible to find an erroneous entry on just one of your reports, but not the other two. In other cases, you’ll have to clean up certain items on all three reports. So if you check one, you might as well check all of them.
Where does the information in your credit reports come from? It comes from you. Specifically, it comes from your history of borrowing and repaying money in the form of credit and loans. This activity gets reported to the three companies mentioned above, where it is compiled into your three credit reports. This information is also used to produce your credit score, which is a three-digit number used by lenders to measure risk.
If you have negative entries in your reports (late payments, debt collections, bankruptcies and the like), it will result in a lower score. And vice versa — a pattern of responsible borrowing will result in a higher score. A low score makes it harder to obtain financing in the future, such as auto loans and mortgages.
But let’s get back to the task at hand. How do you clean up your credit reports?
Things That Show Up on Your Credit
When you review your reports, you will notice that they are broken up into different sections. It’s important to review the accuracy of everything that’s included in your file. But you should pay particular attention to these three sections:
Identifying information: The first thing you will see at the top of your credit reports is your personal identifying information. This will include your name (including previous / maiden names), social security number, current and past addresses, etc. It’s important to clean up any mistakes you find in this section, especially if they relate to mistaken identity. I’ll explain how to clean up this section of your credit report in a moment — and all other sections, for that matter.
Credit history: Most of the information in your reports has to do with your borrowing activity. Any account you have with a retailer, bank, credit card company or lender will show up on your report. In addition to the accounts themselves, your payment history will also appear. This is the most important factor in determining your credit score. Your payment history accounts for 35% of your FICO score, more than any other single factor. So it’s crucial that you review it for accuracy. When you attempt to clean up your credit report, you need to pay close attention to the accounts section. Errors in this section could seriously impact your credit score.
Public information: Legal judgments of a financial nature can also show up in your credit reports. Examples include bankruptcy filings, tax liens, foreclosures, and other monetary judgments made in a court of law. Here again, you need to make sure these entries are accurate.
There are other items within your reports. But these are the main areas where you might need to clean up certain errors or omissions.
What Does It Mean to “Clean” Your Reports?
In your research, you will eventually run into some companies that make big promises about their ability to clean up your credit report. They might say they have a “direct line of communication” with the reporting agencies, or that they use special techniques to expunge negative items faster than you could do on your own. Most of this is just marketing nonsense. There is nothing these companies can do that you can’t do for yourself (and for free).
To clean up a credit report means to remove certain items that do not belong on the report, for whatever reason. It can also mean correcting erroneous information, such as an incorrect mailing address or a misspelling of your name. Legally, there are two types of information you can have removed from your reports — erroneous and outdated entries. If you find something that simply does not pertain to you, like a retail account you never opened, you can have it removed. Likewise, you can have the reporting companies remove entries that are beyond their “expiration” dates.
Negative entries can only remain on your reports for a certain period of time. For most items, such as late payments and debt collections, the limit is seven years. Bankruptcies can stay on there for a period of up to ten years. But after these time limits, the negative entry must be removed. This is one way you can clean up your credit reports. Simply review them for any outdated items that are still showing up.
[In depth: How long do things stay on my credit report?]
Need some extra motivation? Consider this. According to MyFICO.com (the company that designed the FICO scoring model), a single 30-day late payment could lower your score by 60 to 110 points. The amount of damage will depend on the broader scope of your credit situation. But when you consider that the FICO scale only goes from 300 – 850, you can see the significance of this.
If you find a mistake of any kind — whether it’s an outdated entry or a minor administrative error — you need to contact the credit-reporting company to have it fixed. Even a seemingly minor issue could hurt your credit score. That’s the last thing you want. It’s hard enough to maintain a high score in an error-free world. You don’t need any errors putting extra drag on your score. So you need to clean up these aspects of your credit report. And that means you must deal with the reporting agencies. The good news is that the law is on your side.
Dealing With the Reporting Bureaus
I said the law is on your side when it comes to credit reporting. In this context, the law is the Fair Credit Reporting Act or FCRA. This federal law places certain obligations and restrictions on the reporting companies. It requires them to give you access to a free credit report, once a year. It limits what they can do with the information they collect. And (more pertinent to this discussion) it outlines the procedures they must follow when consumers dispute an item on their credit reports.
Here’s what the law says in a nutshell. Let’s say you make an effort to clean up your credit reports. So you request a free copy from Experian, TransUnion and Equifax. On your TransUnion report, you notice a 30-day late payment that’s not yours. It relates to a retail account for a store you’ve never even visited before. This might be a computer data mix-up, or a case of identity theft. Either way, you need to clean this item from your credit report. So you visit the “disputes” section of the TransUnion website, and you submit a detailed explanation of why this entry is erroneous. This is where the law comes in.
Here’s what the Federal Trade Commission (FTC) says about it:
So the reporting company must investigate the disputed information. If they either (A) discover that the information is indeed inaccurate, or (B) cannot make a determination one way or the other, they must remove the disputed item.
As you can see, you can handle all of this by yourself. There are laws in place to empower consumers to clean up their credit reports. You don’t need to pay a third party to do this on your behalf. The law is on your side. The reporting companies must take action whenever a dispute is filed. And you can easily file a dispute through their websites. You can even monitor the status of your dispute, after you submit it to the company. So why would you need to pay some company to do it for you? You don’t.
This article explains how to clean up your credit report on your own. If you would like to learn more about this subject, use the search box located at the top of the website. You’ll find dozens of other credit-related articles on the website.