by Thom Fox

It’s important to realize that if your credit score is poor, it won’t necessarily remain that way forever. Credit reports and scores are very time-sensitive items, and they merely represent a snapshot of your credit profile at any given point in time. Your score from three months ago is probably not the same score a lender would get from the credit reporting agencies today. Obviously, negative information on your report has the greatest effect on your profile. As long as they are accurate, negative credit notations that appear on your reports will only remain for seven years, and then they must be removed. Bankruptcy notations are treated differently. They stay on your report for ten years.

In the meantime, it’s your responsibility to make sure that every new addition to your report shows evidence of better payment patterns. If you do have negative notations on your report, even before the seven years have passed, and if you’ve rededicated yourself to meeting your obligations on time, your credit score should begin to reflect these efforts. If you can be patient and make the necessary adjustments, it is possible to improve your overall credit profile and your credit score. The bottom line is, it’s up to you to improve your credit performance from this day forward.

Perform a Credit Check-Up
To begin the process of improving your profile, order a copy of each of your credit reports from TransUnion, Experian, and Equifax, the country’s three major credit-reporting agencies. Many businesses and lenders report information to only one or two of the agencies, but rarely to all three. This causes the information in your reports to vary greatly. Reviewing each of your reports will provide you with a clearer picture of your overall credit profile.

During your check-up, be on the lookout for errors contained within your credit reports. It has been estimated that more than 40% of the reports on file contain mistakes. So, try to identify negative entries on your report that are incorrect, are invalid, or have been in some way misrepresented. Additionally, look closely for unauthorized inquiries, incorrect mailing addresses, and Social Security numbers, as these may indicate that you have been a victim of identity theft.
 
If you do find errors within your report or discover that you’re a victim of identity theft, there are steps you can take to correct the items in question. As stipulated in the Fair Credit Reporting Act (FCRA), both the credit reporting bureau and the information provider (the person, creditor, or organization that provided information about you to the credit-reporting agency) are responsible for correcting inaccurate or incomplete information in your report.

If you find inaccurate or incomplete entries, file a claim with the credit agencies regarding the information in question. Your dispute should be in writing and contain: (1) your complete name and address; (2) a clear identification of each item in dispute; (3) an explanation as to why you’re disputing the information; and (4) a request that an investigation be initiated. Be sure to include copies (NOT originals) of documents that support your claim. Send your dispute by certified mail, return receipt requested, so you have proof that your claim was received. Also, keep copies of your dispute letter and enclosures for your records.

Managing Credit Responsibly
Here are some additional strategies you can use to improve your credit profile.

• Keep the balances as low as possible on your credit card accounts. High outstanding debt can have a negative effect on your score. 
• Pay off debt rather than move it around. The best way to improve your score in this area is by paying down your revolving credit accounts. In fact, owing the same amount but having fewer open accounts may actually result in a lower score. 
• Don’t close unused or old credit cards as a short-term strategy to raise your score. Shutting down credit accounts lowers the total amount of credit available to you, and it also gives additional weight to any balances you do have when it comes to calculating your credit score. Closing your oldest accounts can actually shorten the length of your reported credit history and make you seem less creditworthy.
• Don’t open a number of new credit cards that you don’t need. This approach could backfire and actually lower your score.
• Don’t open a series of new accounts in a short period of time. If you’ve only been managing credit for a little while, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a negative effect on your score, especially if you don’t have a lot of other credit information. 
• Reestablish your credit history if you’ve had problems in the past. Opening new accounts responsibly and paying them off on time will help raise your score in the long term. 
• Add positive information whenever possible to show stability in your credit profile. If you have extremely poor credit or have even filed for bankruptcy, don't let your credit status go dormant. The faster you begin to reestablish positive credit, the faster you'll improve your credit profile. One way to achieve this is to get a secured credit card.
• It’s okay to have credit cards, but you must manage them responsibly! In general, having credit cards and installment loans (and making timely payments) will raise your score. Someone with no credit cards, for example, tends to be a higher risk than someone who has managed credit cards responsibly.

Improving your credit profile takes time. Unfortunately, negative items tend to affect your credit score much more quickly than positive items. Late payments can negatively affect your score in just a few months, whereas paying bills on time may take 6 to 12 months to generate a significant improvement in your score. The best course of action is to adopt healthy credit habits and to maintain them.

Thom Fox is a public speaker and personal finance author who has helped to develop numerous programs for both young people and adults. As an expert in the field of personal finance, Mr. Fox has served as a guest lecturer for the Bruce Wells Scholarship Upward Bound program at Clark University and panelist for both the Nichols College “Cycle of Debt in America” student Q & A and the California JumpStart Coalition “Innovative Financial Literacy for Youth” conference.