How to Clean up Your FICO score on Your Credit Report Tips

You are entitled to an additional free copy of your credit report each year if:

• You've been denied credit because of information in your credit report.
• You're unemployed and looking for work.
• You've been denied employment (or another adverse employment decision has been made) based at lease in part on information contained in a credit report.
• You received public assistance.
• You believe your file contains errors due to fraud or identity theft

Correct Out-of-Date Information

As you read through your report, make a list of everything that is out of date. The following old information should not appear in your credit report:

4) Dust off an old card. The older your credit history, the better. But if you stop using your oldest cards, the issuers may stop updating those accounts at the credit bureaus. The accounts will still appear, but they won't be given as much weight in the credit-scoring formula as your active accounts, said Craig Watts, an executive at Fair Isaac, one of the leading credit scorers. That's why Ferguson often recommends to her clients that they use their oldest cards every few months to charge a small amount, paying it off in full when the statement arrives.

5) Get some goodwill. If you've been a good customer, a lender might agree to simply erase that one late payment from your credit history. You usually have to make the request in writing, and your chances for a "goodwill adjustment" improve the better your record with the company (and the better your credit in general).  But it can't hurt to ask.

A longer-term solution for more-troubled accounts is to ask that they be "re-aged." If the account is still open, the lender might erase previous delinquencies if you make a series of 12 or so on-time payments.

6) Dispute old negatives. Say that fight with your phone company over an unfair bill a few years ago resulted in a collections account. You can continue protesting that the charge was unjust, or you can try disputing the account with the credit bureaus as "not mine." The older and smaller a collection account, the more likely the collection agency won't bother to verify it when the credit bureau investigates your dispute.

Some consumers also have had luck disputing old items with a lender that has merged with another company, which can leave lender records a real mess.

7) Blitz significant errors. Your credit scores are calculated based on the information in your credit reports, so certain errors there can really cost you. But not everything that's reported in your files matters to your scores.

Here's the stuff that's usually worth the effort of correcting with the bureaus:

• Late payments, charge-offs, collections or other negative items that aren't yours.
• Credit limits reported as lower than they actually are.
• Accounts listed as "settled," "paid derogatory," "paid charge-off" or anything other than "current" or "paid as agreed" if you paid on time and in full.
• Accounts that are still listed as unpaid that were included in a bankruptcy.
• Negative items older than seven (7) years (10) ten in the case of bankruptcy) that should have automatically fallen off your reports.

You actually have to be a bit careful with this last one, because sometimes scores actually go down when bad items fall off your reports. It's a quirk in the FICO credit-scoring software, and the potential effect of eliminating old negative items is difficult to predict in advance.

Some of the stuff that you typically shouldn’t worry about includes:

• Various misspellings of your name
• Outdated or incorrect address information. 
• An old employer listed as current.
• Most inquiries.

If the misspelled name or incorrect address is because of identity theft or because your file has been mixed with someone else's, that should be obvious when you look at your accounts. You'll see delinquencies or accounts that aren't yours and should report that immediately. However, if it's just a goof by the credit bureau or one of the companies reporting to it, it's usually not much to sweat about.

Two (2) more items you don't need to correct:

• Accounts you closed listed as being open.
• Accounts you closed that don't say "closed by consumer.”

Closing an account can't help your scores, and may hurt them. If your goal is boosting your scores, leave these alone. Once an account has been closed, though, it doesn't matter to the scoring formulas who did it -- you or the lender. If you messed up the account, it will be obvious from the late payments and other derogatory information included in the file. (Especially, never close out your credit cards that don’t have a zero balance. It will remain on your credit report.)

Four (4) other credit mistakes

Other actions to beware when you're trying to improve your scores:

• Asking a creditor to lower your credit limits. This will reduce that all-important gap between your balances and your available credit, which could hurt your scores. If a lender asks you to close an account or get a limit lowered as a condition for getting a loan, you might have to do it -- but don't do so without being asked. (Another idea – if you choose to have your credit limit lowered, don’t use your card but don’t close it either – cut up the card and pay it off).

• Making a late payment. The irony here is that a late or missed payment will hurt good scores more than bad ones, dropping 700-plus scores by 100 points or more. If you've already got a string of negative items on your credit reports, one more won't have a big impact, but it's still something you want to avoid if you're trying to improve your scores.

• Consolidating your accounts. Applying for a new account can ding your scores. So, too, can transferring balances from a high-limit card to a lo.wer-limit one or concentrating all or most of your credit-card balances onto a single card. In general, it's better to have smaller balances on a few cards than a big balance on one.

• Applying for new credit if you already have plenty. On the other hand, applying for and getting an installment loan can help your scores if you don't have any installment accounts or you're trying to recover from a credit disaster like bankruptcy.

  By the way, all these suggestions work best if you have poor or mediocre scores to begin with. Once you've hit the 700 mark, any tweaking you do will tend to have less of a positive impact.

  And if your scores are in  the "excellent" category, 760 or above, you'll probably be able to eke out only a few extra points despite your best efforts. There's really no point, anyway, since you're already qualified for the best rates and terms. Here's one area where it's really OK to rest on your laurels and worry about something else.

  Regular check-ups

  Your credit report keeps track of your financial safety and where you stand financially. Even though you only get one free report a year, checking your credit once annually is not enough.