Credit Score Cleanup

When applying for a loan a consumer's credit score is just as important as their annual income on the loan application. A person's credit score tells lenders how likely it is that a person will repay the debt. Credit scores will also impact what interest rate you get on the borrowed funds. Just because your credit is less than perfect, doesn't mean you are forced to pay a 10% interest rate or not borrow for life. There are ways to improve your credit score. It does take time, but it's better to start now on fixing your credit score.

Consumers with too much debt, whether student loans, credit card debts or other loans, need to start by figuring out how to pay back their creditors. First, develop a workable budget and talk to creditors about a payment plan if you can't pay them off promptly.

Here are some tips that can help put you on the road to a good credit score, also called a FICO Score:

* If you have simply missed a payment or two, you can work to improve your score by using credit wisely. Pay bills on time, and if you're tempted to buy something with a credit card, make sure you don't spend more than you can repay within a month. Late fees and interest charges can make add to your debt and challenge your ability to repay.

* Check your credit report by going to annualcreditreport.com. The three credit reporting agencies are required to provide you with a free report once a year through this website or by contacting Experian, Transunion or Equifax on phone numbers available at the site. Consider staggering your requests among the three agencies so you can check your credit report several times a year.

* Be cautious of websites that claim to offer free credit reports. Some will entice you to buy other products or services.

* Take a good look at the report to make sure all the creditors listed are ones you have used. If there are unfamiliar creditors, contact them and find out more about what they allege you owe and any proof of the debt they have. Remember that some creditors may show up on the report even though you no longer owe them money. Report any errors to the reporting agency and ask for them to be corrected.

* Keep all of your original documents, especially receipts, sales slips and billing statements to make sure they match. You may need them if you dispute a bill or report. If the credit agency requests documents, send copies; never send your originals. It may take more than one letter to correct problems, so keep copies of all your letters.

* Be persistent. If your credit file contains errors, you are entitled to have it investigated by the credit bureau. The credit-reporting agency must give you a written report of their investigation -- and a copy of your report if the investigation results in any change.

Cleaning up errors on your credit report can take time and effort, but it will help you improve your credit score in the end. For more BBB tips, go to our Consumer Tips page at bbb.org.