Mellody's Mail: Cleaning Up Your Credit

QUESTION: What is the best way to clean up my credit? I want to buy a house and property.

ANSWER: This is an excellent follow-up question to my recent segment on the Fair and Accurate Credit Transactions Act, which enables millions of Americans to get a snapshot of their credit history for free. The first thing to understand about your credit is that it takes time to improve it, and there are no quick fixes. However, here are some steps which should put you on the right track:

Get the facts and correct any errors. According to the Public Interest Research Group, one in four credit reports has errors that are serious enough to disqualify consumers from opening a bank account, purchasing a home or evening getting a job.

That said, to find out what potential lenders, employers and landlords may learn about you, order your credit report from each of the three big credit bureaus: Equifax, Experian and TransUnion. Creditors are not required to report to all three bureaus, meaning these reports may vary in content, so it is important to examine each one carefully. If you find an error, dispute it in writing. You need to provide a clear explanation of the issue and any necessary supporting documents (be sure to keep copies of all your correspondence as well as the dates you send each letter). The credit bureau must investigate any discrepancy within 30 days of receiving your letter. As soon as the issue is resolved, the bureau will update your report and notify you of the changes. If you are unable to resolve a discrepancy, file a statement (less than 100 words) with the bureau at no extra cost, explaining the dispute. This statement will be included in your credit report for as long as the item in question remains on your report.

Know what affects your credit score. There are five primary factors that impact your credit score:

Delinquent payments (35 percent of your score).

The amount of available credit you have (30 percent of your score) -- the closer you are to hitting your limits, the worse it is for your credit score.

The length of your credit history (15 percent of your score) -- the longer the better.

The number of times you apply for credit, especially credit cards (10 percent of your score).

The mix of your outstanding credit (10 percent of your score).