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4 steps you can take now to help you clean up your credit report

Cleaning up your credit report can help you receive the best interest rates on credit cards, loans and mortgages. Here's how to clean your credit.

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The information listed on your credit report can make or break your next loan or credit card application. Taking a moment to review it and clean it up can strengthen your approval odds and uncover some surprising ways to save money and raise your credit score.

Lenders check your credit report when you submit an application for financial products, such as credit cards and loans, as well as apartments. The information on your credit report helps lenders gauge your ability to repay debt. If there is inaccurate information on your credit report, this can jeopardize your approval rate and affect the terms you receive. 

In fact, roughly one in four Americans have an error on their credit reports, which means there's plenty of cleaning up to do. In addition to spotting errors and resolving them, you can work on paying off debt to improve your credit score.

Below, CNBC Select reviews the steps you can take to clean up your credit report so you can have a healthy credit file.

How to clean up your credit report

  1. Request your credit reports
  2. Review your credit reports
  3. Dispute credit report errors
  4. Pay off any debts

1. Request your credit reports

The first step in cleaning up your credit reports is to know where you stand. You should pull your credit reports from all three major credit bureaus — Experian, Equifax and TransUnion. You can receive free credit reports from each credit bureau on a weekly basis through April 2021 by going to AnnualCreditReport.com.

2. Review your credit reports

Once you pull your credit reports, comb through each one and check that the information listed is accurate. Review the following factors:

  • Personal information, such as the name and address listed on your account
  • Account information, such as balances, credit limit, payment history and current status (active, inactive or closed)
  • Bankruptcy and collection data, such as if any of your accounts were marked past due for over 30 days and sent to a collection agency

3. Dispute credit report errors

If you come across any errors on your credit report, initiate a dispute as soon as possible. You should start the dispute directly with the credit bureau that has the inaccurate information, and this can be done online or via mail.

If the dispute resolves in your favor, the credit bureau legally has to report the issue to the other two bureaus. However, you may also want to send notice to the other two bureaus to cover your bases.

And if the dispute was denied, you can still file a written statement that can be included in your credit report or take further action with FTC or the CFPB.

For more information, check out our step-by-step guide on how to dispute a credit report error.

4. Pay off any debts

If you have lingering credit card debt, you should work on paying it off — especially since your credit utilization rate, or the percentage of total debt you have compared to your total credit limit, is an important factor of your credit score.

There are several ways you can pay off credit card debt. Here are a few options:

  • Complete a balance transfer: By transferring your balance to a card offering no interest for up to 21 months, you can pay it off quicker and cheaper than keeping debt on a high interest card. The Citi Simplicity® Card provides the longest balance transfer intro period at 21 months, after that there's a 14.74% to 24.74% variable APR.
  • Consolidate debt with a personal loan: Since balance transfer cards often require good or excellent credit, you may want to consider taking out a personal loan to pay off debt. Personal loans often have more accepting credit requirements and are helpful for large amounts of debt. A personal loan will help lower your credit utilization rate since it's an installment account (which doesn't factor into utilization), whereas credit cards are revolving accounts (that directly influence utilization).
  • Redeem rewards: If you've accrued cash back, points or miles, you can redeem them for statement credits to help with some of your bill. Keep in mind that the credit you receive will likely cover only a portion of your debt, so you may need to combine this option with another, such as a balance transfer card.

If you don't have credit card debt, you should continue to pay off balances on time and in full each month. It's also important to maintain a low credit utilization rate, preferably below 10%.

Benefits of cleaning up your credit report

After you clean up your credit report, you may benefit from a variety of perks. For starters, you won't have errors on your credit file, which can strengthen your credit history. Plus you may see a rise in your credit score if you removed negative information and/or paid off debt.

Paying off credit card debt, whether it's through a balance transfer or personal loan, can also save you money on interest charges. This can allow you to use the extra money you would've paid on interest for an emergency fund or high-yield savings account

Having a clean credit report and good credit score can also help increase your approval odds for credit cards, loans and mortgages, as well as your ability to qualify for the best interest rates.

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Information about the Citi Simplicity® Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.


Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.