There are a few steps you can take today to start fixing your score. Let's look at what you need to do and we will outline the factors that will influence your rating.
1. Get a copy of your reports from each bureau. Federal law allows you one copy of your report every year from each bureau for free. Once you have these you need to identify items that are inaccurate, mistakes, or negative marks.
These items are bringing down your score. Do not think your report will not have mistakes on it either, it is estimated that 1 in every 4 reports have an error on them. This error could be costing you real money in higher interest rates and be lowering your rating.
2. Once you identify these items you need to dispute them with each bureau. You can do this yourself or hire a service to do it for you. Either way a dispute letter will have to be sent to each bureau that is listing this item. In the letter you will need to include the item in question, the reason, and any other information you have regarding it.
3. This is the tricky part, getting the bureaus to deem your dispute valid and then conducting an investigation. Unfortunately they do not earn any more money being ensuring their information about you is correct. Instead they spend money when they conduct investigations and so are very related to do so.
4. You must remain persistent and organized. If you hit a wall and just get too frustrated then we strongly encourage you to research a professional service. They can be hired at reasonable rates and this way you will not just be giving up and living with a low score, you do not have too!
5. Once the bureau determines your dispute to be valid they will investigate and they will contact the original lender or creator of the negative mark. If the lender is unable to verify the account then it must be removed from your file.
This information from your file will account for approximately 40% of your score that is a huge factor! This is also called your payment history. If you have derogatory items there take action to remove them and in the meantime, ensure that you are paying all your bills on time.
As negative items from your file, age they will influence your score less and less. At the same time if you are paying your current bills on time you will begin to record a trail of positive payments.
There are four other effects on your score starting with the amount of debt you have, these accounts for roughly 30%. It is looking at car loan, home loan, student loans … and simply how much debt you have. This is looked at and weighed so heavily because it gives the bureaus an idea of if you can take on any more debt. It is also a good idea if you can that you have funds that could be used and are not using for example a major Visa or MasterCard that has the majority of the limit available.
The last three factors are; How old is your file, what types of items are in it, and how many new items have been added recently. The less number of items you add the better, along with the longer and more diverse accounts you possess. However these factor at only 10% each and are not really something you can influence as easily as your payment history.