How To Clean Up Your Credit Report

A credit report is an important part of any individual's financial journey. It is important because we all come across the need for credit one or the other time in life. It may be for a purchase of an asset like a home or a vehicle, to fund education, meet emergency situations like medical emergencies, funding a wedding, a holiday, or to ease the crunch at the end of the month.

Whatever may be the need, there is credit available for that kind of need. However, what you need to make yourself eligible for credit is a good credit score. A good credit score is not only got by being responsible towards credit, but also by keeping your credit report clean.

A Clean Credit Report

What does a clean credit report mean? It is the report that is free of errors and any such remarks that can be detrimental to your credit health and ends up affecting your chances of getting credit the next time you require a loan or credit card.

We bring to you six simple steps which will help you clean up your credit report.

 

Steps to clean up your Credit Report	What it means
Get your Credit Report copy	You can get it for FREE at CreditMantri
Verify the information	Check if the information given in the report is all correct
Get rid of the errors	If you encounter any error, remove it immediately
Evaluate the number of your credit accounts	If you have many accounts, it’s time to free up some account and improve your debt to income ratio
Resolve negative accounts	Negative accounts reduce your credit score. Resolve these accounts at the earliest with CreditMantri’s help
Improve credit score	Improve credit score to get the best loans and credit cards

 

Step #1: Obtain A Copy Of Your Credit Report

To be able to set right your credit report, you would need to assess your report in the first place. If you are someone who is not familiar with a Credit Report and its contents and how it affects you, it may be good to either contact a professional Credit Improvement Service like us that can help you understand your credit report and suggest you the right steps to take to clean up your credit report and improve your credit score.

And if you are someone who has never had a look at your credit report, it is high time you do it. Being aware of your credit report and its components helps you resolve your problems with credit report, if any, faster. Do check your credit score and your credit report.

Step #2: Verify The Information In The Report

Your credit score is assigned based on the data pertaining to your credit behavior, which is reported by your lenders to the credit bureaus. It contains information regarding all your credit accounts, whether open or closed, your repayment history: if your credit accounts are in the green (promptly repaid) or are not being repaid promptly, your credit utilisation ratio, your credit mix, the length of your credit history, and the number of hard enquiries against your PAN.

It is very essential that you verify the information included in your credit report. Not all may be right, it is possible that certain errors might have crept into your credit report.

Additional Reading: What are the various kinds of errors possible in your credit report?

Step #3: Get Rid Of The Errors In The Report

Errors in your credit report can impact your credit score in a wrong way, often bringing your score down. It is very important to go through your credit report as often as possible to check if there are any errors on your report. 

If you find any errors on your report, it is quite easy to set right the errors through a simple dispute resolution process.

The most commonly found errors in a Credit Report are:

Error Type	What it means	Effect
Identity Issues	Incorrect PAN or personal information	Medium-High
Account Errors	Wrong reporting of credit limit, loan balances, account status	High
Identity theft	Someone else uses your identity and conduct fraudulent transactions under your name	High

 

• Errors due to Identity Issues: A credit score is built with a PAN as the base. It is possible that due to oversight or clerical error, PAN number or names may get mixed up with that of another individual with similar records.
• Errors due to Wrong Reporting: These kinds of errors may be shown as wrong credit limit, incorrect loan account balances, closed loans being shown as Delinquent or Settled or same debt being shown more than once.
• Errors due to Identity Theft: Errors in the credit report may also result due to cases of identity theft, wherein someone uses the identity of another person to obtain credit. These are graver in nature and should be reported to the Cyber Cell of the Police Dept.

Step #4: Evaluate The Number Of Credit Accounts You Have

A clean credit report is not only error-free but should also demonstrate your creditworthiness. Once you are done sorting the errors on your credit report, you should concentrate on the number of your credit accounts.

If you are someone with a number of credit accounts like loans and credit cards, it may be time for you to evaluate the same and try closing some of them. If you are paying EMIs beyond the prescribed limit of 40% of your gross income or even anywhere close to it, getting new loans may prove difficult for you.

In these cases, it is good to work up a budget to pre-pay some of the loans, so that you can free up a part of your income.

Step #5: Work On Getting Negative Information Off Your Report

Negative Information on your report may be on account of your earlier late payment, defaults, settlements or even bankruptcy. A credit report with negative information gets translated into a low credit score which can hurt your future prospects of loan.

So, it is good to work on getting the negative information off your credit report at the earliest. It can't be just erased from your report on a representation or request from your end. Minor issues like one odd late payment may find way out of your credit report after a considerable period of prompt payments.

However, when it comes to graver negative information like Settlements or Defaults, experts say that they could remain on your credit report for as long as 7 years.  Therefore, it is extremely essential that you avoid getting into conditions like those.

Step #6: Start Working Towards Building A Good Credit Score

A good credit score is a non-negotiable entity in the world of credit. The need for credit can arise at any time. Building a good credit score cannot be done overnight or even in a period of weeks. It takes sustained efforts of being responsible towards credit over a longer period of time.

For some it may take 3 months while for some it can go up to a year, depending on how low your score is, and the kind of negative information is on your report.

With the kind of importance that credit score and credit report have gained in the recent times, one cannot afford to be lax about having a good score and a report.