Establishing Credit

Step 1: Get Your Free Credit Report

The first step towards fixing bad credit is to know what is being reported on your credit report. By law, every U.S. citizen is entitled to a free copy of their credit report every twelve months, available at annualcreditreport.com. You’ll need to pay extra or use a different service to get your actual credit score, but your credit report will show you what’s being stated.

Step 2: Review Credit Report for Errors

One of the easiest ways to improve your credit score is to fix errors on your credit report. Here are some of the common credit report errors to look for:

• Incorrect street address
• Incorrect name (look out for a similar name or suffix being reported on your report)
• Fraudulent accounts, which are accounts you didn’t open. Beware, as this could be identity theft.
• Incorrect account information such as:
  • Inaccurate credit limits
  • The wrong origination date on a loan
  • Wrong Social Security Number
  • Wrong birth date
  • Spouse’s information is inaccurate
  • Accounts that are mistakenly shown as being open or closed. Look to see if there’s a notation on the account saying if you or the creditor closed the account (and if that’s accurate).
  • Wrong payment status information

Step 3: Dispute Credit Report Errors

Once you’ve reviewed your credit report for errors, next you’ll want to dispute those errors with the credit bureaus. You can do this using a letter (like this sample from the FTC), or you can dispute them online through each of the three credit bureaus. In both scenarios, you’ll want to point out the errors, and state why the information is inaccurate, then request that the items be fixed and/or removed.

It’s a good idea to send a copy of your credit report and, if you are disputing by mail, send it via certified mail. If you prefer to dispute your credit errors online, use the links below for each of the three credit bureau’s pages with information on their process:

• Transunion Dispute
• Experian Dispute
• Equifax Dispute

After you file a dispute, be diligent and follow up to make sure it was resolved.

Step 4: Lower Debt

Your debt-to-credit (DTC) ratio refers to percentage of your income that goes toward paying your debt each month. Keeping a lower debt-to-credit ratio can help improve your credit score. Lenders want to make sure that you’re living within your means before they allow you to take on more debt.

Strategies for lowering your DTC is to pay down your current debt and get an increase on your credit limit, without utilizing it. Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. You often can increase your scores by limiting your charges to 30 percent or less of a card's limit.

Step 5: Set up Automatic Payments

Approximately 35% of your credit score, the most important factor in credit worthiness, is your ability to pay bills on time. Utilize Octave Trust Bank’s Online Banking or CUONE Mobile app to set up recurring payments for bills that are the same each month to make sure those are always paid on time – especially your credit cards and loans. Use Online Bill Pay to set up a payment each month for at least the minimum balance to ensure payments are made on time.

Be Careful with New Credit

Another factor that makes up your credit score is any new credit. Be cautious the next time a retailer offers you 10 percent off and double points if you open a store credit card. If you need a new line of credit, don’t jump at the first appealing offer; compare rates, fees and options.

Talk to Credit Counselors if You’re in Trouble

Using a legitimate, non-profit credit counseling agency can help you manage your debt and won’t hurt your credit score. For more information on debt management, contact the National Foundation for Consumer Credit.

Fixing Bad Credit is Worth The Effort

Improving your credit score takes time, but with some effort and planning, it can help you qualify for a mortgage or get a lower interest rate on your credit card.Want to talk to someone in person about your credit? Visit any of our London branches today.