How To Repair Your Credit Score

Your credit score is one of the most important factors in getting a loan, qualifying for a mortgage on a house, getting financed on a new car, or being approved for a new credit card. Repairing your credit score is essential if you want to be eligible for the best deals available. A high credit score tells lenders that you are reliable, and as a result you will get lower interest rates and better terms. On the other hand, a low credit score labels you as high risk, making lenders more likely to charge you a higher interest rate – if they don’t reject you altogether.

Negative items on your credit report, whether they are accurate or not, can be devastating to your credit report. Many people do not realize that credit bureaus frequently make mistakes in reporting credit information, which then affects innocent people’s scores – in fact, one study in 2004 found that about one in four credit reports contain major errors. If steps are not taken to correct these errors, they can have a significant impact on your ability to get a loan or qualify for a new card.

Even if the negative items are accurate, there is still hope for repairing your credit score. By following the five steps listed below, you can eliminate negative items from your credit report and improve your overall credit score, paving the way to more easily obtained loans and credit cards.

  1. Order your credit reports. In order to start repairing your credit score, you will need to contact each of the credit bureaus – Experian, Equifax, and TransUnion – for a copy of your credit report. Make sure you order your report from all three, as the information each contains can be different. For example, if one of them made a mistake on your credit report, that mistake may not be repeated on the other two. 

    Some states mandate that the credit bureaus give you a free credit report every year. If your state is not one of those, you may still be eligible for a free credit report if potentially negative items have been reported recently, or if you have recently been denied credit due to your credit score. Otherwise, you will need to pay for your credit report, but the fee is minor if you only order the basic report.

  2. Study your credit reports. Once you have all three credit reports, you will need to look over each carefully. First, you should look for any errors that could potentially impact your credit score, such as:
    • Credit card limits that are reported as being lower than they truly are. This may make it look like you carry a higher percentage of your available credit than you actually do.
    • Accounts that don’t belong to you. Having additional accounts on your credit report may make it look like you already have more credit than you can handle.
    • Inaccurate reports of late payments, judgments, and other negative items. Negative items can severely impact your credit score. Make sure you are not taking the fall for a late payment or a judgment that never actually happened.
    • Accounts that are falsely reported as being delinquent. Make sure your credit report accurately reflects each account’s status.
    • Negative items older than seven years or bankruptcies older than ten years. Negative items should drop off your credit report in seven years. It takes a little longer – ten years instead of seven – for a bankruptcy to drop off.
    • Accounts listed as delinquent that were eliminated in bankruptcy proceedings. If you filed bankruptcy, the accounts that were involved should no longer say “unpaid.”

    You should also check your credit report for accurate negative items that you would like to have removed, if possible. Good candidates include:

    • Negative items belonging to you that you believe you may be able to contest. For example, if you have made one or two late payments on an account that is otherwise in good standing, you may be able to convince your creditor to remove the negative items from your credit report.
    • Negative items belonging to you that are more than several years old. Creditors typically care less about older missteps in your account history, and may not bother to verify the information if you contest it with the credit bureau.
  3. Contest any errors. If you find any mistakes in your credit report, you will need to send each credit bureau a letter contesting the error(s). You should also include photocopies of any documents you have that support your claim. Keep copies of all your correspondence, and when mailing letters always request a return receipt for your records.

    Once the credit bureau receives your letter, they will notify the creditor. If the creditor does not verify the information within 30 days, the item will be removed from your credit report. However, sometimes you may need to repeat this process in order to ensure the errors are removed, so be sure to check your credit reports again in a month or two. If the problem persists, you may also need to send your creditor a letter requesting the error be corrected.

  4. Attempt to remove accurate negative items. Even if the negative items on your credit report are accurate, removing them is essential if you want to repair your credit score. Two types of negative items that you may be able to remove are negative items on an account that is in good standing, and negative items from several years back.
    • Negative items on accounts in good standing. If you are in otherwise good standing with your creditors, they may not mind removing the odd late payment report. You will need to send a formal letter stating your request. Be sure to keep copies of all correspondence for your records, and when sending letters always request a return receipt for your records. If your creditor does not agree to your request the first time, you may want to try again at a later date.
    • Negative items that are several years old. Often creditors do not care as much about verifying negative items that are more than a few years old, and this may work to your advantage. If you think there is a chance your creditor will not verify a negative item from several years ago, you can contest the item by claiming either that the charge was unfair, or that the negative item is an error.
  5. Adopt credit-boosting habits over the long term. A sincere effort to repair your credit score also needs to include a plan for the future. Whether or not you were successful in removing negative items from your credit report, improving your habits can only help you in the long run. Here are a few tips to help you keep your credit clean in the future.
    • Keep your total credit card debt at approximately 50 percent of your total available credit. Your credit score will be best served if you do not regularly max out your cards.
    • Carry two to four major credit cards. Too few credit cards and you won’t be able to build a respectable credit history. Too many and creditors will view you as a liability.
    • Keep your older credit cards. Even if you pay off cards and decide to close a few of your accounts, be sure to keep the older cards. Established accounts help your credit score by demonstrating long-term credit history.
    • Only apply for as much credit as you need. If you have plenty of credit but keep applying for more, you will only end up hurting your credit score.

Your credit score is one of your most important assets in life. The lower your credit score, the more money you will lose on high interest rates and fees on credit cards, car loans, and mortgages – if you qualify at all. Luckily, with a little time and patience you can repair your credit score, enabling you to qualify for better deals on credit cards and loans.


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Great credit repair tips.

By Jason Kay