Step 1: Get Your Credit Report

As of Jan 1, 2004, due to the new FCRA Act of 2003, all credit bureaus will be required to give out one free credit report per year. They are rolling this program out slowly as the year rolls on. You can see when you are eligible for a free report. Note: The Credit Bureaus are not required to give out your credit score for free. If you want to order your score in addition to your free report, most are charging about $5.95. The free reports are good for 30 days only, so make sure you print your reports if you get them online.

You can order your free annual credit report online at www.annualcreditreport.com, by calling 877-322-8228, or by completing the Annual Credit Report Request Form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

When you order, you need to provide your name, address, Social Security number, and date of birth. To verify your identity, you may need to provide some information that only you would know, like the amount of your monthly mortgage payment.

Beware! There are some websites out there who are posing as the free annual credit report site who are engaged in fraudulent activities.

If you have applied for a loan by having your credit pulled, you may be able to get a copy from the lender you applied through. Ask the lender what on your credit report looks bad and how to read your report. Most lenders will help you because they want your future business.

Step 2: Analyze Your Credit Report

When you first receive your Trans Union and Equifax credit reports, you will be totally lost. The information is coded in a way that is not immediately readable by the average consumer. Each credit report should arrive with a key that interprets the codes and indicators on the credit report. Sit down with the credit report and the key and study it until you understand what each number and code means.

Don't write on your original credit report -- yet. Make all of your notes on a copy of the report. You will be sending your original report with your dispute letter, so you should make at least two copies of each new report. The original goes with the dispute, one copy is for notes, and the other copy is what you will send in to the credit agency.

Gather a yellow and orange highlighter pen. Whenever you identify a negative listing, mark the listing in yellow on your scratch copy of the credit report.

Very often, it is difficult to tell if an item on the credit report is negative or positive. The following table will help you identify every negative listing on your credit reports.

Very often, it is difficult to tell if an item on the credit report is negative or positive. The following table will help you identify every negative listing and code on your credit reports.

O = Open (entire amount due each month i.e. AMEX)
R = Revolving (payment amount variable i.e. VISA)
I = Installment (fixed number of payments i.e. Auto loans)

0 = Approved, no rating
1 = Paid as agreed
2 = 30+ days late
3 = 60+ days late
4 = 90+ days late
5 = 120+ days late or collection
7 = Making regular payments under wage earner or similar plan
8 = Repossession
9 = Charged off to bad debt

J = Joint
I = Individual
U = Undesignated
A = Authorized User
T = Terminated
M = Maker
C = Co-Maker/Co-Signer
B = On behalf of another person
S = Shared

Step 3: Rank Questionable and Negative Items

Step 2 covered how to identify items, both positive and negative on your credit report. Now you have this list, you should rank each item according to the amount of damage they are doing to your overall credit picture. Rank the most damaging information first, followed by the next most damaging information, followed by those items which are neutral. Do this for each credit report, as remember, they may not all have the same information on them. They may even have duplicate information. If this is the case, you will need to write to each credit agency individually for each duplicate item.

The items here are listed in order of descending importance with the first item being the "most damaging" to your credit.

• Bankruptcy

• Foreclosure

• Repossession

• Loan Default

• Court Judgments

• Collections

• Past due payments

• Late Payments

• Credit Rejections

• Credit Inquiries

Also, if your creditor has not notified you of negative information they have recently placed on your credit report, they are currently in violation of the Fair Credit Reporting Act. You can use this to pressure the original creditor to remove the listing by reminding them they are in violation of the FCRA.

Step 4: Requesting Corrections and Disputing Your Credit

What should you challenge?

Everything, and you should always shoot for a complete deletion. Don't bother challenging the information within a collection listing, charge-off, court record, repossession, foreclosure, or settled account. As the basic nature of these listings is negative, changing the information within the listing will yield no improvement. Severely negative listings, such as these, must be disputed on the basis of complete deletion or not be disputed at all.

What items are the toughest to get off your report?

You will have the toughest time getting bankruptcies and foreclosures off of your credit report as these things are so easy for the credit bureaus to verify. In the case of a bankruptcy, you most likely will have a few trade lines saying "included in Bankruptcy". If you want to challenge your bankruptcy, you need to clear off all credit lines mentioning a BK first.

Step 6: Document Your Credit Repair Efforts

As soon as you have ordered your credit reports and photocopied your order letters and checks, you must create a precise organizational system to track your correspondences with the credit bureaus and your creditors. Why is this necessary? Unfortunately, credit items you have worked so hard to remove mysteriously reappear. If this happens, it is usually easy to have the items deleted permanently if you show your complete records on the first removal. Why take a chance? As you proceed through these steps, keep copies and records of all correspondence you send and receive. Copies of all correspondence are a must, as well as notes on all telephone conversations! Also, if you should encounter any special difficulty and would like help in repairing your credit, you will need these records to proceed.

Every time you have a telephone conversation with a creditor, you must document the conversation by recording the name of the person to whom you spoke, his or her position, the date and time of the conversation, what was said in the conversation, and what was agreed upon.

Step 7: Wait for the credit bureau to finishing investigating

Once the credit reporting agency has received your dispute letter, they are obligated to investigate. This obligation is not contingent upon you having been denied credit. According to the Fair Credit Reporting Act of 1997, the credit bureaus must take the following steps:

• The credit reporting agencies must resolve consumers' disputes within 30 days limit

• In response to consumers' complaints that documentation in support of their disputes was disregarded, the credit bureaus have to consider and transmit to the furnisher all relevant evidence submitted by the consumer the first time.

• Consumers will receive written notice of the results of the investigation within five days of its completion, including a copy of the amended credit file if it changed based on the dispute.

• Once information is deleted from a credit file, the credit bureaus can not reinsert it unless the entity supplying the information certifies that the item is complete and accurate and the credit bureau notifies the consumer within five days.

The Federal Trade Commission says that inaccurate credit reports are the number-one source of consumer complaints, and that it is quite common for problems to take six or more months to be resolved. All of the big-three agencies are working on making sure that all disputes are handled within 30 days.

If the new investigation reveals an error, you may ask that a corrected version of the report be sent to anyone who received your report within the past six months. Job applicants can have corrected reports sent to anyone who received a report for employment purposes during the past two years. However, this is unlikely to repair any damage done when your credit report was first pulled, so don’t waste your time or energy on this approach.

Step 8: Evaluate the results of your repair efforts.

You did save the original credit report your ordered, didn’t you? And each item you challenged? Good, you will need them to evaluate how well you did. It’s all part of Step 5 above, documenting your efforts.

When you get your “repaired” credit report back from the credit bureaus, they will summarize what changed on your credit report due to your challenges. You can compare this list to your own notes or just to the previous credit report.