How To Clean Up Your Credit Yourself in 6 Easy Steps

Having good credit is crucial for getting approved for loans, credit cards, apartments, and even jobs. A high credit score can save you thousands on interest rates and make it much easier to get approved for the things you want and need. But if you have bad credit, it can feel hopeless trying to clean it up and raise your score The good news is, with some effort and patience, you can clean up your credit all by yourself In this comprehensive guide, I’ll explain what it takes to repair your credit on your own step-by-step.

Why Should You Bother Cleaning Up Your Credit?

Here are some of the main benefits of having good credit

• Lower interest rates: If you have good credit, lenders will offer you loans and credit cards with lower interest rates. This can save you a lot of money over time.

• Better chances of getting credit: If you have good credit, you have a much better chance of getting credit cards, loans, mortgages, rental applications, and more.

• More borrowing power—If your credit limit goes up and your interest rates go down, you can borrow more money. This makes things like mortgages more affordable.

• Gain financial freedom—Having good credit gives you options and lets you act quickly on purchases or borrowing needs that come up.

• Avoid deposits – Landlords and utility companies often require deposits for tenants with poor credit. Good credit lets you skip deposits.

• Better insurance rates – Insurers often check your credit before issuing policies. Keeping your credit in good standing can save you on premiums.

• Employment – Many employers check credit during background checks. Poor credit could hurt your job prospects.

How Credit Scores Are Calculated

Before getting into the steps to take, it helps to understand what goes into your credit score. The FICO score and VantageScore are the two most common credit scoring models.

Here are the general factors they consider and their approximate weight:

• Payment history – 35%

• Credit utilization – 30%

• Length of credit history – 15%

• Credit account mixes – 10%

• New credit applications – 10%

Payment history carries the most weight – about 35% of your total score. That’s why paying all your bills on time is imperative.

Credit utilization, or the percentage of your total available credit you’re using, is also very important at 30%. Keeping balances low on credit cards is key.

Length of credit history considers how long you’ve managed credit accounts. Having long, established accounts improves this factor.

Next is credit mix, which refers to having different types of credit like credit cards, loans, mortgages, etc. Lenders like to see you can handle different types of credit responsibly.

Lastly, new credit considers any new accounts you’ve opened. Opening a lot of new accounts in a short period can negatively impact your scores.

Now let’s go through the steps to take to start cleaning up your credit yourself.

Step 1: Get Your Credit Reports

The first step is pulling your credit reports from Experian, Equifax and Transunion. This allows you to review your reports for errors and see where you stand.

You can get free weekly reports from each bureau at AnnualCreditReport.com. You can also get your Experian report directly from their website. Be sure to check reports from all three bureaus since they don’t share data with each other.

Once you have your reports, read through them carefully. Make note of any errors you find so you can dispute them. Also note areas you see room for improvement.

Step 2: Dispute Any Errors

If you find incorrect information on your reports – like accounts that aren’t yours or negative marks from a lender error – you need to dispute these immediately.

Each credit bureau has an online dispute process you can initiate on their website. Simply provide details about the error and any supporting documents. The agencies are legally required to investigate disputes within 30 days.

If they find in your favor, the erroneous information must be removed. This can boost your credit score quickly. Keep disputing until errors are fully resolved!

Step 3: Pay Down Revolving Account Balances

As noted, the second biggest factor in your scores is credit utilization ratio. You want this to be as low as possible, ideally under 30%.

Make a list of all your credit cards and other revolving credit accounts along with their balances and credit limits. Pay down the cards closest to their limit first. Getting every card below 10% utilization is ideal.

You can also increase limits on current cards if permitted by the lender. This lowers utilization. Just don’t go on a spending spree with the new limits!

Paying down balances directly lowers the usage that gets reported to the bureaus, boosting this pivotal scoring factor.

Step 4: Catch Up On Past Due Accounts

If you have accounts that are past due or accounts that have gone to collections, bringing them current or paying them off can significantly help your credit.

Contact the lenders and explain your situation. See if they will agree to let you pay the past due balance in exchange for removing late payments from your credit reports.

If you have accounts in collections, you may be able to pay them for a “pay for delete” agreement. This is where they delete the collection account from your reports after payment. Definitely negotiate this before paying collectors!

Step 5: Optimize Your Credit Account Mix

Lenders want to see that you can responsibly manage different types of credit – not just credit cards. Having installment loans like mortgages, student loans, and auto loans can improve your mix of accounts.

If you have credit cards and loans, make sure you’re actively using them all regularly. Having unused accounts closed by lenders hurts scores.

If you only have credit cards, you may want to open an installment loan to diversify your profile. Start small – like opening a credit builder loan or retail account. Pay it diligently to build positive history.

Just don’t open too many new accounts too fast! New applications hurt scores if done excessively.

Step 6: Let Time Work For You

Some credit scoring factors simply take time. As months and years go by, negative marks fall off your reports and account ages grow longer.

Most negative items fall off your credit reports after 7 years. Just a few more months could boost your scores if you have old defaults.

Allowing your credit history length to extend helps as well. Make sure to keep longstanding accounts open to maximize this factor.

Keep accounts open even if you don’t use them. Closing unused cards hurts the length element of your reports.

Bonus Tips for Maintaining Great Credit

Once you’ve cleaned up your credit, staying on top of maintenance is required to keep your scores up. Here are some quick tips for sustaining great credit:

• Check credit reports from each bureau annually for errors. Dispute any you find.

• Sign up for credit monitoring to stay on top of new inquiries and accounts opened in your name.

• Pay all bills on time, every time. Set up autopay if you tend to forget due dates.

• Keep credit utilization very low. Ideally under 10% on all cards.

• Only open new credit if you have a specific need, not just for a sign-up bonus.

• Hold onto your old credit cards. Having long open accounts boosts history.

Staying diligent by monitoring your credit and practicing good credit habits will keep your scores trending upward. Be patient and persistent – anyone can clean up their credit themselves with some commitment to healthy money management.

Cleaning up bad credit yourself is very doable with consistent effort over time. The most important steps are checking your credit reports, disputing errors, paying down balances, and optimizing your account mix. Establishing great credit habits then keeps your scores trending positively.

With a little diligence, you can clean up your credit on your own and start enjoying the many benefits that come with good credit – like saving money on interest and qualifying for the best loans and cards. Use this 6 step game plan as your guide to DIY credit repair success!

It typically takes 12 to 24 months to raise a credit score from 500 to 700, but the exact timeframe varies based on individual circumstances.

No, that’s not entirely accurate. While most negative information, like late payments, charge-offs, and collections, generally disappear from your credit report after 7 years, the debt itself isn’t necessarily erased.

You can’t delete your bad credit history entirely, but you can take steps to improve your credit score and remove inaccurate information from your credit reports.