Now that you're married or in a committed relationship, you want to put your plans for the future in motion. You know that some of these plans, like that condo you have your eye on, will involve taking out a loan. To ensure you get the best deal possible, you order your credit reports to see where you stand and find that you have a couple of dings. If you wonder if it will matter, wonder no more — it will.
TL;DR (Too Long; Didn't Read)
Removing derogatory items from your credit report is a great way to increase your overall score. That's why it's so important to review your credit report periodically.
What's On a Credit Report
Your credit report is a record of your bill-paying history, outstanding debt, collection actions, civil judgments, late payments and the age of your accounts. Each of these records is evaluated and assigned a number of points. The total number of these points become a credit score, which is what lenders look at to decide whether to give you a loan and on what terms. Your credit score may indicate the likelihood that you will pay a creditor and pay him on time. Any negative entry on your credit report can contribute to a lower score.
Correcting Bad Entries
According to Experian, one of the three major credit reporting agencies in the United States, it does help your score to remove derogatory information, though you may not notice the change right away. If you dispute an entry, the credit reporting agency is obligated by law to investigate it. It must notify the company that reported the disputed entry, and they must investigate it. If the entry is erroneous, it is deleted, your report updated and the company that reported the erroneous information must notify three credit reporting agencies of the error.
Finally, at your request, it must send a corrected credit report to anyone who has made a credit inquiry on you in the last six months. The entry cannot be put back into your file unless the creditor verifies the information is accurate. If it remains disputed, you can request that the credit reporting agency note the dispute on your account.
Paying Off Bills
Pay off any bills that are outstanding. If you can't afford to pay it all, call the creditor and see if he will settle. Since your credit report is a history of payments, paying it off will look good, but will not get the entry deleted. However, it will show as a balance paid in full, if that is the case, or paid current, if you still owe but your payments are no longer past due.
Though it remains on your report for seven years after the last transaction, a paid-off debt scores slightly better than one that isn't paid off, and as time goes by, it becomes a debt of the past and counts less.
Repairing Credit More Quickly
To repair your credit more quickly, continue to use credit to prove that your past behavior is just that — in the past. By continuing to use credit and making timely payments, the negative effect of the missed payments will diminish in the face of your good behavior in the present. If you pay off bills and don't continue to use credit, there will be nothing getting good points to offset the bad, and your credit will take much longer to repair.
Julie Segraves is a freelance writer and photographer. She has written for several community newspapers in Chicago and authors her own blog. Segraves graduated from Loyola University with a Bachelor's in sociology and a minor in criminal justice. She currently works in the IT field as a mainframe operations analyst and disaster recovery specialist.