Getting Your Credit Back on Track

If you are looking to apply for a loan or a line of credit, but are concerned whether you will get it, there are certain things you can do to help convince a creditor to approve your application.

Getting a copy of your credit report is a great first step to seeing whether you will be approved for a loan. A credit report is a record of how you have borrowed and paid debts. It may include your employment information, loan payments, creditors who have requested a report and public information such as bankruptcies, foreclosures and court judgments. Creditors will rely on your credit report when deciding whether to give you a loan.

There are three major companies that provide credit reports, Equifax, Experian and Transunion. Currently, everyone may get one free credit report from each of these companies each year. In addition, a free report may be obtained if you were denied credit within 60 days, you are unemployed and applying for a job within the next 60 days, you receive public assistance, or you have reason to believe mistakes exists on your report due to fraud. To get a free copy of your credit report, contact the Annual Credit Report Request service by phone (877) 322-8228 or on-line at www.annualcreditreport.com.

Review your credit report

Once you get your credit report, review it closely for mistakes. There should not be any negative credit information older than 7 years old or bankruptcy information from more than 10 years ago. If you find any mistakes on your credit report, contact the reporting agency and fix the mistake before you apply for a loan.

See AlaskaLawHelp's page on requesting, reviewiong, and understanding your credit report.

When the time comes to apply for a loan or a line of credit, you will have to show the prospective creditor that you will be able to make your payments. If you have a credit report that shows that in the past you have paid your debts on time and have never defaulted on a loan, the report will speak for itself. But if you have had some financial bumps in the road and your credit report is not great, you may want to supplement your credit report with information that will help the creditor understand that you are going to be a responsible debtor. For example, with your loan application, include a letter to the creditor explaining the problems on your credit report and what you have done to fix those problems. Maybe you missed a few mortgage payments while going through a divorce, but now you are making regular payments. This insight on your reasons for missing payments will be helpful in the creditor's decision-making. Also with your application, submit proof that you make other payments in a timely manner. You could provide proof of rent, utilities, or car payments. Providing the information is important to show the creditor that you are going to make payments on time and you are not going to default on the loan.

You can make your own credit score better

Paying your debts on time and in a regular manner is the most important part of having good credit. Once you have started taking positive steps toward establishing good credit, using some of the simple tools described above should help you get the credit you need for that next big purchase you want to make.

Beware of companies that claim to help fix your credit score.

Credit repair companies offer to help fix credit reports. Beware of these companies, because they can make false promises. Credit repair companies cannot delete bad credit and they cannot make changes to your report that may be dishonest. There are many things that you can do yourself to repair your credit without relying on companies that may try to take advantage of you.

• The Federal Trade Commission has a more detailed explanation on its website.
• The Federal Consumer Protection Bureau also has excellent information and how-to guides.
• AlaskaLawHelp's page on requesting, reviewiong, and understanding your credit report.