01/25/2012 03:35 pm ET

The Secret Equation That Guarantees Better Credit

When my clients first take charge of their financial situations and decide to achieve healthier credit, they are often surprised by the number of errors that exist on their credit reports. Fortunately, many of the problems are often cleared up when my clients dispute the errors by alerting the credit reporting agencies about the inaccuracies.

But not every problem on my clients' credit reports can be traced to incorrect information. It would be nice if that was the problem but we can't blame all of bad credit scores on a typo.
The truth is, not everyone handles their finances as well as they should. And, as money gets tight, bills can stack up. They don't get paid in full or on time, and that had a serious negative impact on credit scores.

There's nothing to dispute there! We hate to admit it, right? But if we were to be brutally honest with ourselves, credit reporting agencies do accurately report debt mismanagement. And after the errors were cleaned up, it's easy to feel a little guilty as those poor habits are suddenly revealed.

Fortunately, those problems are still fixable. However, they can't be fixed by disputing with the credit reporting agencies. Instead, they can only be fixed by applying a secret equation that you'll love to know about.

If you are in the process of improving your credit and you've passed the step of disputing errors and moved on to dealing with the cold hard truth of your credit practices, then you need to know about this secret equation that will guarantee you get better credit. Here's the equation:
Improved credit score = Good credit habits + Time

Yes, it's that easy. Improving your credit health and increasing your FICO score is best accomplished when you combine good credit habits and time.

Good credit habits include paying off your bills in full and on time; reducing the amount of inquiries you make (by applying for fewer loans and credit cards); and managing the amount of debt you carry compared to your income. This is a choice you need to make and it requires planning and discipline to stick to.

And time is simply that: Running out the clock while information about your bad credit habits "age off" of your report, replaced by the positive information from your good credit habits. You can't accelerate it; you just have to wait it out. (They can sometimes take a couple of years or longer, depending on the issue). The best thing you can do is just live your life and stick diligently to your new and improved credit habits. As our parents used to say: "Patience is a virtue" and "Time heals all wounds."

Disputing errors on your credit report is actually pretty easy when compared to trying to stick to a budget and waiting for your credit score to improve. But it will get better if you stick with it. Just keep reminding yourself that the waiting is going to be worth it - you'll have a better score, you'll be paying less in interest and late payment fees, the burden of debt will be lifted, and you'll have healthy credit to move forward in your life.

Many people do it and so can you... only if you apply the secret equation that guarantees better credit.

Please email me with your credit question or story