Normally, when I have clients that want to discuss their credit score, I first let them know that there are many credit agencies out there, and each one rates you differently.

But, of course the same principle applies at each of them. Your credit score will be good or bad, depending on the interpretation of the people and institutions rating your financial situation. Of course you want your score to be high.

How do we do that? In simple terms, we get a copy of your credit report and clean it up! But, it gets much deeper. I tell my clients, there is a three-step approach to cleaning up your credit report.

1. Whatever is true is true, is true

You can not clean up something – that is true. If, for example, you defaulted on a prior credit arrangement, then you cannot wave a magic wand and poof! It’s gone! It is true, and will stay on your credit report. However, note that depending on the type of credit you’re looking for, there are some statute of limitations where you can have your prior default eliminated, but you’re looking at at least ten years before this can happen.

2. Whatever is false is false, is false

You would be amazed at what could appear on your credit report that may not be attributable to you. I run into this problem all the time. It could be a similar address. It could be a similar last name. It could be a similar social security number. This is probably the predominant reason why you should look at the report annually. If it is false, all you have to do is ask the credit agency company to remove the falsity – more on that below.

3. Whatever is outdated must be updated

This, believe it or not, is the most common area that takes your credit score down. I give my clients, the “holiday example”. Let’s say in December, you decide to buy a lot of presents, and you charge them to your credit card. During the month, you get your bill, and you’re asked to pay the minimum amount – let’s say $50. Because it’s the holidays though, you need all your free cash available, and you decide not to pay the December payment. You figure you will catch up in January. So, in December, you do not make the payment and the credit company puts “no payment” in your December records.

Now, January comes and you get your bill – $50 for December and $50 for January. You paid it. “Congratulations!” you say to yourself. You’ve caught up on your billing. Well, that’s true but not on your credit file. On your file, it shows you made a $100 payment in January, but you were still “delinquent” in December. Should the credit company change that? Years ago, I also thought they should before I learned the hard truth: it is not THEIR responsibility to make the change automatically. It is OUR responsibility to contact the agency and tell them to make the correction.

So, in the areas of points 2 and 3, these areas keep your score down. So, how do you clean them up?

Fixing Your Credit Report

Under the Fair Credit Reporting Act of 1974, we have the power to correct our credit report. All you have to do is ask. Get a copy of your report, and see which areas fall under points 2 and 3, and just simply write a letter to the credit agency saying, “Under the Fair Credit Reporting Act of 1974, I am requesting that my credit file be updated. The following listed items are either false or NOT delinquent.” Then, just list those items.

Under the law, the agency has up to 30 days to research and see if you are correct with your assumptions. If you are, in 30 days, your credit report will be updated. As those falsities or delinquent items come off your report, your credit score indirectly starts to go up.

As I have worked with several clients over the last three decades, it feels great to watch their scores go up.

Professor Anthony Rivieccio MBA PFA is the founder and CEO of The Financial Advisors Group, celebrating its 24th year as a fee-only financial planning firm, specializing in solving one’s financial problems. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Co-Op City News, The Bronx News, thisisthebronX.info, The Parkchester Times and The Bronx Chronicle. Mr.  Rivieccio also pens a financial article called “Money Talk”. Anthony is also currently an Adjunct Professor of Business, Finance & Accounting for both City University of New York and Monroe College, a Private University. Professor Anthony Rivieccio’s Facebook page is: www.facebook.com/yourfinancialdoctor.

You can reach Anthony at 347.575.5045.