Friday, October 24, 2014
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Accurate Credit Report Does You Good



Haven't reviewed your free annual credit reports yet? You might find out you should have at the most inopportune moment—when you try to get a loan, sign up for utility service, or even apply for a job.

Credit reports provide a very personal look into your financial world. They contain information about where you live, where you have worked, how much money you owe, if you pay your bills on time, and whether you have filed for bankruptcy. The information can bolster your credit standing or undermine it.

This information is collected and updated regularly by the three nationwide consumer reporting agencies: Experian, TransUnion, and Equifax. Independent credit score developers such as Fair Isaac Company, VantageScore, and LLC develop proprietary scores that lenders use to assess the information in credit reports. The consumer reporting companies sell that information to creditors, insurers, and other businesses that have a valid need. Those businesses want to evaluate your applications for such things as insurance, credit, or renting a home.

If you don't review and correct problems on your credit reports, businesses that receive them will make their judgments about you based on wrong or incomplete information.

When the people you're dealing with tell you what they've based their decision on, you can respond that there has been a mistake. That, yes, it will be corrected. But are you, and will they be, prepared to wait?

The National Foundation for Credit Counseling (NFCC), Washington, D.C., in its annual Financial Literacy Survey, found that 65% of respondents had not ordered their report in the past 12 months. Asked why not, 43% said they didn't think it would be useful to them. Another 43% indicated they didn't because they don't plan to apply for new loans or credit.

"Obtaining your report and understanding its contents are basic building blocks of financial stability, so it is discouraging to know that so many have not taken advantage of this free resource," says Gail Cunningham, vice president of membership and public relations at NFCC.

Review your annual reports and ensure that your credit is worthy. Here's how:

Get your free annual credit reports

As provided for by the federal Fair Credit Reporting Act, you can obtain one free report every 12 months from each of the three nationwide consumer reporting companies. Stagger the reports every four months in rotation so you can keep tabs throughout the year.

Only one website has been officially authorized to provide credit reports: AnnualCreditReport.com. You also can call 877-322-8228, or complete a request form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You'll need your name, address, Social Security number (SSN), and date of birth, and you may need to provide some details to verify that it's you making the request.

You can obtain one free credit report every 12 months from each of the three nationwide consumer reporting companies.

Check the basics first

Are your name, SSN, birth date, and address correct? Rod Griffin, Allen, Texas, director of public education at Experian, notes that the three things he's most asked about as errors are not errors at all: variations in name, SSN, and address.

"Experian lists all name spellings and variations, Social Security number variations, and address variations reported to it by businesses," says Griffin. "We do so to ensure the consumer has a full account of the identifying information reported to us by lenders. Doing so enables the consumer to identify indicators of fraud or identity theft and to subsequently act on it. If Experian were to omit those variations, it may prevent a consumer from being alerted to fraud.

"In most instances, however, the variations are simply the result of a person using a nickname to apply for credit or other services—'Robert' on one application but 'Bob' on another, for example, or a typographical error such as a transposed digit in an address," Griffin says. These issues do not affect a person's credit scores or lending decisions.

Verify the information for each mortgage, loan, credit card

Some of it can get complicated. If a loan is sold, the lender listed may not be the same as the original. Check outstanding balances, credit limits, dates when the credit was obtained, and whether accounts were closed and who closed them. Look at unfavorable information such as late payments or collection accounts and make sure the data are correct.

Look for all types of errors and omissions

If there are problems in the reports, they can be large or small. It can be accounts that are duplicated, a lien after a bill has been paid, or different names, SSNs, addresses, or accounts you don't recognize.

A study by the Policy and Economic Research Council, Durham, N.C., of more than 2,000 consumers found that only 0.93% of credit reports that consumers examined prompted a dispute resulting in a credit score change of 25 points or more. The study also found that only 0.50% of consumers had credit scores that moved to a higher "credit risk tier" upon completion of the dispute.

When Dorothy Barrick, group manager and financial counselor with GreenPath Debt Solutions, Troy, Mich., reviews reports with clients as a free service, "We find all kinds of things. Often the major creditors have all been paid on time, but we find that the cable box was not marked as returned." Other times it might be a check that bounced, an old gym bill not paid, even part of a medical debt—maybe just an X-ray—forgotten.

Contact the company that has provided the incorrect information as well as the credit reporting agency.

Many times, the data are not disputable. The unfavorable information is valid and needs to be taken care of. But when it is in error—you know you returned the cable box, for example—you can start the correction process, says Barrick.

Dispute incomplete or inaccurate information

Contact the company that provided the incorrect information as well as the credit-reporting agency, says Cunningham. "Do everything in writing and keep copies. Working with both the source of the information and the credit-reporting company can help ensure the issue is resolved quickly."

Once a dispute is received, the bureau is required to investigate the claim. Any resulting change to your credit report after the investigation requires that you be notified and provided with a free copy of your revised credit report. The 30- to 45-day period allows time to mail documentation back and forth if necessary. The results of an investigation generally will be reported within 30 days. However, the time period can take up to 45 days if the consumer provides additional documentation supporting removal of the disputed item.

New regs keep you in the know

In 2011, two new provisions went into effect that will alert you to information that may be hurting your ability to get credit at good rates.

  • The Fair Credit Reporting Act's (FCRA) risk-based pricing regulation took effect Jan. 1, 2011. Risk-based pricing (RBP) is a practice in which higher-risk consumers receive less-favorable credit terms. The rule says that, when a lender decides to extend credit based on your credit score or credit report, it must send you a RBP notice when the credit terms you received are less favorable than those offered to others for the same type of credit. Some creditors have chosen to send the alternative credit score "exemption notice" to all applicants in lieu of the RBP notice.

  • The Dodd-Frank Wall Street Reform Act amended the FCRA to require lenders to disclose credit scores and related information to consumers in RBP and adverse action notices if a credit score was used in setting the credit terms or denying credit. The regulations implementing these changes were effective Aug. 15, 2011.



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