Your credit report is a snapshot of your financial history. It is crucial to improve your credit rating. Without a good to excellent FICO score, it is nearly impossible to qualify for a car or home loan. More recently, it has become more difficult to find a job or an apartment without good scores. Waiting until you request for a loan or apply for a job is not the best time to find out your scores were lower than you thought. If your scores are lower than they should be, then you need to know what happened to lower them.

Fortunately, you can clean up your financial records on your own. This brief DIY guide will cover the basic information you need to improve your financial history. Here are a few things you can do right away to improve your scores.

Step One: Know What Is In Your File.

Before you begin, you will need to have the most current copies of your reports from the three major credit reporting agencies(CRAs). The CRAs are required to send you a free copy once every year.

Step Two: Know What to Look for in Your File to Improve Your Credit Rating.

Keep an eye out for accounts which might not be yours. It is not uncommon for the negative accounts of other people to show up in your file if they have a similar name as yours, or who currently live at a former address of yours.

Make sure your name, address, and employment information is correct.

Look for closed negative accounts which are older than seven years.

Check for unauthorized hard inquiries. Hard inquiries are information requests from companies or individuals to check your file for a loan, a job or an apartment application. Hard inquiries remain in your file for two years. If you find inquiries which are older than two years, or if you find inquiries which you did not authorize, you have the right to dispute them and have them removed from your records.

Check for major derogatory items such as collections, bankruptcy, foreclosure, car repossession, or liens. If you have certain legitimate derogatory items listed in your file, you cannot have them removed. However, they will fall off after seven years for foreclosures and repossessions, and 10 years for bankruptcies. Liens remain in your file until you pay them.

Step Three: Dispute Incorrect Items with the CRAs.

Dispute incorrect information directly with the CRAs. Each CRA offers an online dispute process. However, It is best to write a hard copy letter and send it by certified mail with a signature receipt. Sending a letter also increases the chances of having your dispute reviewed by a real person instead of an automated review process.

Step Four: Check Your Current Loan Balances.

Try to keep loan balances below 30% of the limit for each account. Carrying balances higher than 30% of your limits lowers your scores.

Managing your financial history is a lot of work. It takes time and effort to review your financial history and dispute the incorrect information you can find in your files. Use the tips in this guide and your scores will improve with time.

This is not for legal or financial advice. Please consult a legal or financial advisor for your specific situation. 

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