How To (Actually) Remove Negative Items From A Credit Report
A version of this blog post on How to Get Items Removed From Your Credit Report was originally published by our content partner Money. They are a digital magazine and a resource for personal finance news and information.
Having a good credit score is an important part of most people’s lives. It lets lenders know how trustworthy you are with borrowing money. This can include everything from a small business loan to a big financial commitment like a home mortgage.
Yet, in 2020, most people still have no idea how their credit score works and the importance of having the correct information on their credit report.
Here are some things to keep in mind next time you think about your credit score.
What Goes Into Your Credit Report
This is your first line of defense — Knowing what information goes into your credit report can provide you an idea of your financial health and also identify if you’ve been the victim of identity theft.
To find out if the information on your credit report is correct, the three main credit reporting agencies (Equifax, Experian, and TransUnion) allow you to obtain a copy of your credit report once a year.
Due to the current COVID-19 pandemic, all three credit reporting agencies are now offering free weekly online reports through April 2021; this should be your first step.
Next, you have to find out what information makes up your score and what factors can improve or negatively affect it. Finally, ask how you can improve your score. Usually, that information is provided to you as a list of risk factors when obtaining a copy of your credit report.
Rod Griffin, Senior Director of Public Education for Experian, said risk factors “tell you exactly what you need to work on in your credit report to make those scores better.”
Removing Negative Items From Your Credit Report
Getting an item removed from your report is not easy and there are usually several steps to take in order to do so.
- Dispute the information with the credit bureau
- Initiate a dispute directly with the reporting business
- Hire a professional credit repair service
- Get credit counseling
- Pay for delete
- Write a goodwill letter
- Wait it out
Negative Impacts on Your Credit Score
Here is a list of factors that can impact your credit score in a negative way and stay on your credit report for up to seven years in most cases.
- Late Payments or Non-Payment: One of the most important factors of your credit score. Paying your debts late on a consistent basis can signal lenders that you cannot afford, or are unwilling, to pay your debts. If you are overdue on a payment by 30 days, according to Equifax, your score can drop 100 points.
- Having a charge-off: When a creditor gives up on you paying your debt, they “charge off” your account which can cause your credit score to drop by 100 points or more.
- Bankruptcy: This should be considered as your last resource. Declaring bankruptcy can negatively affect your score by up to 200 points or more.
- Foreclosure: Depending on what your starting score is, a foreclosure can cause up to a 100 point drop.
- Repossessions: A car repo may cause your score to drop over 100 points. Additionally, a note about the repossession will stay in your report for up to seven years.
- Judgments: This is when a court is involved to ensure debt repayment. The impact can vary but scores can drop over 100 points. This, along with tax liens, stay on your credit for 10 years and it is renewable for another 10 years if the plaintiff decides to go back to court.
- Collections: When a credit hires and outside firm to collect payment due on a debt. Categorized as payment history, scores can drop over 100 points too.
The 5 Categories Your Credit Score is Composed of
- Payment history (35%)
- Amount Owed (30%)
- Credit history length (15%)
- Credit mix (10%)
- New Credit (10%)
If you make payments on time, keep your credit usage below 30% (compared to your credit limit), have a good balance of different kinds of debt (credit cards, mortgages, personal loans, etc.), you should be on your way to having a great credit score.
At the same time, a factor that can negatively affect your credit score, although not as much, is having a short credit history. For example, someone with more than 20 years of credit history will have a better score than a young college student who recently started using credit.
Luckily, having a low credit score does not mean you will not be approved for a loan until it goes back up. Some lenders provide information on the average score applicants need to qualify for a loan. It is recommended that you speak with your preferred lender so you are clear on the requirements for obtaining a loan with a low credit score.
Having negative impacts on your credit score can make most financial goals an uphill battle. Most negative impacts stay on your report for up to seven years, which can hurt your chances of obtaining new credit during those years. In addition, having a low credit score could translate into getting a higher interest rate on your home mortgage loan which means having to pay about $100,000 more in interest during the life of that loan.
When someone steals and uses your personal information, your credit is at a great risk. If your information is used to apply for new lines of credit and these accounts go into default, you are still responsible for them.
Thanks to the internet, finding people’s personal information doesn’t take that much effort. Here is a list of different ways your identity can be stolen.
- Credit card theft
- Credit card skimming
- Browsing an unsecured website
- Malicious software
- Mail Theft
- Phishing scams
If you suspect any information on your credit report looks suspicious, contact your lender immediately to file a report. Having your identity stolen can result in financial loss, credit damage, and loss of peace of mind. Depending on the severity of your stolen personal information, it can take years to resolve.
This is why it is utterly important to report anything that looks suspicious when looking over your report.
Although the risk of identity theft cannot be entirely eliminated, there are some measures you can take.
- Monitor your credit report on a regular basis
- Report suspicious information
- Freezing or locking your account temporarily
- Contact law enforcement and file an identity theft report
- Set up a fraud alert
Credit Repair Strategies That Dont Work
- Filing for bankruptcy: Even though you eliminate your debt when filing for bankruptcy, your credit score will be severely damaged. Additionally, the note of your bankruptcy will stay on your credit report for seven to ten years.
- Closing a line of credit that is behind on payments: This affects your credit to debt ratio and does not really remove the debt owed which negatively impacts your credit score calculation.
To sum it all up, having a great credit score is necessary to help you meet financial goals much faster. Now, keep in mind that making all the right moves won’t necessarily mean your score will improve overnight. However, checking your credit report regularly is the best defense you have for protecting your credit.