First you want to get proof of the error.  This can include items such as your canceled checks, previous billing statements, any relevant court judgment papers, and a letter from your creditor acknowledging the status of the account in question.  Start contacting the credit bureau that listed the error and keep a log of all the calls you make, emails you send, names of people you talk to, etc.  Make sure that when you send anyone your documentation that you send photocopies and keep the originals for yourself—you may not get them back, or they may get lost in the mail, and then you’re out of luck.

Inform the creditor of the mistake.  If they reported something incorrectly (for example, that the account is still open but you have proof that you paid it off), they must correct the error and contact the bureau to have it updated or removed.  In fact, once you report an error to the credit bureau, they are required to contact your creditor.  The creditor has 30 days to send proof that the account is open and valid and belongs to you.  If they don’t, the error must be removed from your report, and you will receive another free copy of it.

If your inquiry turns into a larger dispute, you can take legal action.  You’ll be spending more time and money to get the error removed, but if it’s hurting your score and you know it should not be on your report, it’s well worth it.

At the end of all these steps, if the error cannot be removed, you are entitled to add a small explanation to it on your report.  For example, if you missed payments to your credit card because you lost your job or had medical problems, this can be listed alongside the account.  The creditor is also required to include your explanation every time they report to the bureaus.  This will not improve your score, but the next time you apply for credit, the lender may be more inclined to approve you if they understand the circumstances behind your negative history.

First thing to realize that the exact elements that make up your credit score are not publicly known. Credit experts have pretty much figured out how your rating is calculated, but these numbers are not set in stone.

Secondly, it is important to realize that recent events have a greater weight on the credit score scale than current events. That can be both good news and bad new. Recent late payments will greatly impact your score, while recent good payment history will improve your score. That provides an opportunity for people who want to increase their credit score to do so relatively quickly just by paying their bills on time.

The Credit Score Scale

1. The biggest part of your score is your previous payment history. This makes up about 35% of your credit score. The more late payments you have on your report, the more it will hurt your score. Your ability to pay your debts and bills on time has the greatest effect on your score. This should be no surprise here.
2. How you use and manage your credit is a close second. Lenders like to see that are capable of  managing your money properly. You want to have a lot of credit available to you, but low balances. Consumers who are close to reaching their credit limits are statistically likely to be late on their payments. Keep your balances below 30% of your available credit. Your credit use is about 30% of your credit score scale.
3. The length of your credit history is the next most important factor. In other words, the longer you have accounts open and are a customer with your billing agencies, the better it is on your score. That’s why it is not always a good idea to close credit card accounts. The history of owning credit cards for a long time is good for your credit rating. This accounts for about 15% of your score.
4. Lenders like to see your ability to manage different types of credit. Having both installment loans (such as a mortgage and car payment) and revolving credit (such as your credit card) in good standing will help your score. This is about 10% of your credit score’s value.
5. Lastly, inquiries on your account makes up the remaining 10% of your score. It is okay to shop around and compare auto loans and mortgage rates, but you don’t want to go out and open multiple credit cards in a short amount of time. That’s a signal to lenders that you are having money problems and may be about to embark on a spending spree.

See How You Rank on the Credit Score Scale

Since the credit crisis, lenders, creditors and banks have been forced to tighten their belts and raise their standards. In many cases a 650 credit score won’t even allow you to qualify for a loan at all — let alone a good loan. Unfortunately this is hurting a lot of people who need to buy a car or are trying to purchase a new home.

The reality is that a 650 credit score in the past is the equivalent of a 750 credit score today. That 100 point swing is a big difference that most Americans do not meet. A 750 means you have:

• Near Perfect Credit
• Always Pay Your Bills on Time
• No Excessive Credit
• No Recent Collections

Unfortunately this is the new standard and consumers need to take their credit score more seriously. No longer are the days that  a few small errors would be okay in the eyes of the lender. You need to prove that you have a history of borrowing money responsibly.

If you are buying a home or car, you may also be surprised to find that not only is your 650 credit score no longer good enough, but you will be required to put down a larger down payment as well. Banks are in a panic and they are being very cautious with the people they lend their money to.

Those planning to make a large purchase are encouraged to download their credit score and reports early. It is possible to increase your credit rating within 30 days time, but that can’t be done without knowing your current situation and where it needs to be.

Download Your Credit Score and Reports

The first step is to closely review your credit report. This file contains important personal and financial information that you want to be sure is accurate, but that is not always the case. The three credit reporting agencies are faced with the task of managing millions of transactions for millions of people on a daily bases. Every once in a while the wrong information is placed on your credit report.

By law, you are entitled to an accurate credit report, thought that is not always the case. However, it is your responsibility to review this information and dispute where necessary. Just by doing this, you can improve your chances of getting a loan at the best possible rate. Beyond that, a clean credit report can help you get better rates on your insurance and even help you get a job.

But don’t stop there. By law,  you can dispute any item on your credit report and the agencies must investigate the dispute. If they do not come up with enough evidence to support the claim within 30 days, it must be removed from your file. That means it is entirely possible to have any negative items on your report removed — regardless if it belongs there or not.

Many times the agencies can’t find enough evidence, while other times it is just not worth the money and resources it costs companies to research the claim. There is nothing on your credit report that can’t be removed by properly disputing the items.

Once you’ve identified the items you would like to dispute, simply send a dispute letter to the credit reporting agencies that list that item. Be sure to use certified, return receipt mail so you have proof that the dispute was filed and received.

Give them 30 days to respond. If you do not hear back, follow up in writing and demand that the item is removed from your file.

When you dispute credit report items, do not try to dispute all of them at once. Start with the bigger picture items that can make the greatest improvement in your score. Otherwise the reporting agencies will not work for you in your favor.

Before you can take any serious action, you must have recent copies of your credit reports. This is a mandatory step, as you want to clearly document and include copies of  your report with your dispute.

Instantly Download Your Credit Reports

While some of these methods may not have sustained, long-term results, it will help increase your rating now so you can quickly get the loan or financing your need.

The first thing you can do is improve your debt ratio. This is the amount of outstanding debt you have as it compares to the amount of available credit. Confused? Let me explain…

If you have a credit card with a $10,000 spending limit, and you have a $5,000 balance, that means you are carrying a 50% debt ratio. If you owe $7,500, you would have a 75% ratio. Basically the closer you are to maxing out your credit lines, the more it hurts your score. Lenders like to see that you have been extended a lot of credit and that you know how to manage it properly.

Statistically, people who are near their credit limit and at risk of maxing out their credit cards are likely to be late on their payments and default on their loans. For that reason, you score suffers when you use too much of your available credit.

Just by lowering this ratio, you can improve your score, and there are two ways to do this. The first is to pay off your balance – simple enough. The second is to re-distribute some of that debt. If you have another card with no outstanding balance on it, transfer some of that balance to the other card. That will reduce your debt ratio.

Another way to quickly increase your score is to make sure you have different types of credit. As mentioned above, lenders like to see your ability to manage credit. That means they want to see your experience in handling all different types of credit and loans.

In order to do that, you want to be sure you have both an installment loan and revolving credit. Revolving credit is like your credit card. Every month you “borrow” money by using your credit cards, and every month you receive  a bill based upon how much you used and the balance you carry.

An installment loan is one where you obtain cash and have a fixed monthly payment plan, which can be 5, 10 or 30 years, for example. A car loan, a home mortgage, or even a bank personal loan are examples of this. So if you get a small personal loan from the bank, deposit the cash in a high-bearing interest savings or CD, and pay your bill on time every money, you’ll quickly boost your score.

The third quick credit fix is to closely look over all 3 of your credit reports. There’s a very good chance that these reports contain wrong information that is hurting your score. It is not uncommon to have late payments on things you were never late for, or an account marked open that should have been closed. Find these mistakes and get them fixed. By law the reporting agencies must investigate and repair the issue.

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