Your credit score may be the number everyone is talking about when you're trying to get financing for something like a car, but your credit score wouldn't exist without your credit report.
Your credit report is a record of your financial life. It also details things like where you've lived and if you have debts in collections. Your credit report lists a lot of information, and much of it is used to generate your credit score. This means if you want a higher credit score, it's time to fix your credit report.
Why Does Your Credit Report Matter?
Your credit report matters because it builds your credit score. Without a credit score, you're likely to have trouble in your financial life with things like loans, credit cards, and mortgages. Having little to no credit makes it less likely that you can finance a car, too.
Your credit report tells lenders about five things that all combine to make your credit score, a number between 300 and 850. These are:
- Payment history - worth 35% of your score
- Amounts owed - worth 30% of your score
- Length of credit history - worth 15% of your score
- New credit - worth 10% of your score
- Credit mix - worth 10% of your score
Identify Errors and Inaccuracies
The first step to fixing your credit report is to check it for errors. One way to raise your credit score and contribute to a healthy credit report is by removing inaccuracies. When you identify and remove errors on your credit report, you can help to clean up the portions of your credit that contribute to your score.
To identify errors, you need a copy of your credit report. You can typically get these directly from the credit bureaus, or you can obtain a copy for free each week by visiting www.annualcreditreport.com, a government-authorized website that has been providing free reports to consumers for over a decade.
Once you get your report, you will want to inspect every section to ensure that the information is correct. Make sure that there are no outstanding debts in collections that have been paid, or that anything is showing that is over ten years old. If you do find something, you can then report it to have it removed from your account.
Dispute Errors with the Credit Bureaus
To dispute these errors with the credit bureaus, you can usually file a claim online and provide proof that the outstanding debt or other inaccuracy has been taken care of. You can also call the credit bureaus or send them a dispute by mail.
The credit bureau will then look over the information and make a determination as to whether or not to remove the bad debt. They have three days to respond to your claim. When they do, they can either remove the incorrect record or open an investigation into the item being disputed.
If they open an investigation into your credit report, they will have an additional 45 days to complete their investigation.
Follow Up and Keep Records
The credit bureaus have three days to look into your dispute.
If they delete the error within the first three days, the credit bureau will follow up with you to notify you by telephone that the issue is resolved. You will also receive a follow-up with written confirmation of the change and a fresh copy of your new credit report without the error, within five days of their decision.
If the credit bureaus don't delete the error from your report in the first three days, they have 30 to 45 days to investigate and amend your credit report. You need to continue to follow up with the credit bureau you filed the dispute with if you don't hear back from them. Don't forget to keep your correspondence for future reference, as you may need it if things aren't resolved promptly.
Pay Down Existing Debts
A terrific way to clean up your credit reports and improve your credit score is to improve the areas that make the most impact on your credit score. This means paying your existing bills on time and in full.
When you do this, you are contributing to the largest part of your credit score, your payment history. It also lowers the amount you owe, making your credit utilization ratio go down. If you hope to achieve a good credit score, the less you owe on your open lines of credit, the better.
Negotiate with Creditors
Another way you can help clean up your credit reports is to negotiate with your creditors to bring down the amount you have to pay off. This works especially well if you have a lot of debt in collections and are looking to pay off as much of it as possible.
For this to work, you have to be a good candidate for settlement, and you will need to evaluate whether you can make a lump sum payment on a debt or if you have to negotiate a lower payment.
Avoid Future Credit Report Issues
To really help improve your credit report, it's best to keep things paid and not to default on any loans or financial obligations you may have. Remember, paying your bills on time and in full is your best course of action since payment history makes up most of your credit score.
You should also avoid having too many inquiries on your credit report. The more you seek credit just because, the more red flags a lender will see. Only apply for a loan or credit card when it's absolutely necessary to avoid unwanted hits to your credit.
What to Do If You Can’t Fix It Alone
Filing a dispute with the credit bureaus doesn't cost anything, but if you decide you don't have the time or energy to do it yourself, or if you find your credit report is chock-full of errors, you also have the option to hire a credit repair company.
A credit repair company is a company that can do the legwork and report the errors to the credit bureaus for you. They take the work off your plate, but the service costs you, so it's up to you whether you'd rather save time or money.
If a credit repair company still can't get the errors off your report, you then have the option to speak with a credit report or consumer protection lawyer.
The Bottom Line
When your credit report is looking bleak, you can take the steps to clean it up yourself or get a credit repair company to do it for you. However, if your credit report is in decent shape, but you still have a low credit score, you may need help getting the auto financing you need. This is where we come in.
At Auto Credit Express, we know where to find the automotive special financing lenders who can help consumers with bad credit. If you need a car loan but haven't had any luck due to poor credit, let us guide you. We work with a nationwide network of special finance dealers, and we can help you connect to one in your area. Simply fill out our auto loan request form to get started.
