August Financial Fitness Challenge—Clean Up Your Credit Report
It would be bad enough to be turned down for a loan because of some past bad financial habits. Imagine being turned down because of mistakes in your credit record.
It happens. In fact, the U.S. Public Interest Research Group some years ago found errors in as many as 80% of credit reports, one-fourth of them serious enough to scuttle a loan application.
And a loan turn-down isn't the only potential fallout: You might get the loan, but be charged a higher interest rate than the one you'd qualify for without the credit report dings.
Know what it says
Your credit report reflects all of your credit activity over time. It tells what money you owe and to whom. It cites every time you were on time or late with a payment and for how long, and shows cases where you walked out on your debts.
The collected information in your report is the source of your credit score, a three-digit number that lenders use to decide whether or not to offer you credit and at what price. That's why it matters—a lot—whether or not the info in the credit report is reliable.
You sure don't want to learn about mistakes, or omissions, just when you apply for a home loan or a car loan. That's why it's important to monitor your credit report.
The credit reporting system manages enormous amounts of data. Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), said in a speech in Detroit in July, "Each year, approximately three billion credit reports are issued and more than 36 billion updates are made to consumer credit files."
Some estimates indicate that the three biggest credit reporting companies keep files on about 200 million Americans from more than 10,000 information sources. So it's inevitable that some mistakes will creep in.
The good news is that it's easy to find out what your credit report says about you. You can request one free report a year from each of the three major credit reporting bureaus by visiting annualcreditreport.com, the only website authorized to provide these free reports.
Check your credit report for accuracy; you're looking both for errors and omissions.
You also can call 877-322-8228 or complete the Annual Credit Report Request Form and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA, 30348-5281.
If you stagger your requests among the major credit reporting agencies, you can monitor your credit report over time. Mark your calendar and initiate one request every four months to Equifax, Experian, and TransUnion in turn at annualcreditreport.com. Do not make your requests to the individual reporting bureaus.
The Fair Credit Reporting Act (FCRA) also gives you free access to your credit report within 60 days if you've been denied a loan, insurance, or a job based on information in a report.
Being proactive about reviewing your credit report makes it possible to spot and correct mistakes and omissions in a timely way, as well as to see evidence of identity theft that may be occurring in your name.
Clean it upFCRA gives you the right to dispute bad information in a report that's no more than 90 days old. Here's how:
2. Check it for accuracy; you're looking both for errors and omissions, say, a paid account that you didn't get credit for.
3. File a dispute with the credit reporting agency either online, in writing, or over the phone.
It also can make sense to get in touch with the creditor to speed up some corrections from that end.
How you file your dispute is up to you, but keep in mind that you have a paper or virtual trail if you mail or email your information. You can scan and attach information by email to support your dispute. If you use conventional mail, always send copies, not originals; use certified mail and ask for return receipts.
One consumer group estimates errors in as many as one-fourth of credit reports are serious enough to scuttle a loan application.
In your dispute:
• Tell the credit reporting company to investigate the item or items you question.
• Identify each disputed item by account number and related dates.
• Say, briefly, why you think the information is inaccurate.
• Add copies of documents that back up your dispute.
The CFPB's Cordray recently announced that, come September, the agency will begin to oversee the credit reporting industry, incredibly, for the first time. He says, "Our country's credit system is a resource in which we all have much at stake—both directly and indirectly—and we need this system to operate effectively in order for the credit markets to work properly and fairly."
Financial Fitness Challenge
Your credit union money mentors bring you this website and other tools to help you make the most of your financial resources. The Financial Fitness Challenge continues to look at ways you can make better financial habits no matter what condition the economy is in.
Each month we randomly select five winners to receive $50 Visa gift cards; we choose each month's winners only from that month's entries, so enter every month. Remember to register for the Financial Fitness Challenge.
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