The first step in rebuilding your credit, as easy as it sounds, is to obtain a copy of your credit report. It's extremely simple but it is essential to move forward getting your credit score up to par again.
In the process of credit rebuilding, it would be advantageous for you to review you credit report at least once every six months. If you have a low credit score it would be wise to review you credit score quarterly. The common myth is that pulling your credit report will affect your credit score, but it will not.
By obtaining a credit report it gives you the opportunity to review your credit report for any errors. If there any errors make sure you address them immediately especially if they are severe. Almost 80 percent of people do have errors on their report and about 25 percent of people have errors that are severe enough to cause people to lose a loan or a job opportunity. This is a vital reason for you to be aware what is on your credit report.
When you find an error on your report, what should you do?
Being a victim of identity theft could be a huge reason why you credit is hurt. If you think someone stole your identity call the three credit bureaus right away to put a freeze on your credit account. This way, no one else can open credit in your name.
If the mistake doesn’t seem to indicate you are a victim of identity theft, you can start by filing an online dispute at each of the three credit bureaus:
If a bank or credit card company is responsible for incorrect information on your credit report, contact them immediately. Ask them to investigate the mistake they reported to the credit bureaus. Make sure you have documentation to support your statements.
One of the most common (and dangerous) errors you will find is an inaccurate credit limit.
So why does an inaccurate credit limit hurt your credit score?
The credit-scoring agencies give higher credit scores to people with lower utilization rates (your credit card balance as a percentage of your limit.) If your limit is, for instance, $2,000, and your balance is $600, you have a utilization rate of 30 percent.
Maintaining a 30 percent utilization rate is optimal. It should improve your credit score.
If your credit card company is reporting your limit as $1,000 instead of $2,000, this is an error. Your utilization rate will appear to be 60 percent (a $600 balance on a $1,000 limit). This is a bad utilization rate because it may seem that you rely on credit. This will cause your credit score to drop.
Notify the credit bureaus of the error on your credit limit by filing a dispute with all three credit bureaus. At the same time, place a call or send a letter to your credit card company demanding they report your correct limit. Correcting errors help rebuild your credit score.
After all major errors are corrected, get another copy of your credit report to verify it is error-free. If it is, focus on rebuilding your credit to increase your credit score.
FYI: Your credit score will not decrease if you get a copy of your credit report. Inquiries into your credit score by lenders will cause a dent in your score, but you are not penalized for getting your own credit report. This is considered responsible financial behavior. Therefore, get your credit report as often as you desire to check for errors and/or to rebuild your credit score.
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