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Disputing Incorrect Information on Credit Reports
Reading credit reports can be confusing. Before you assume there is an error, make sure you are interpreting the information correctly. The good news is that you can effectively dispute errors. Keep records of all your telephone conversations and correspondence. Get the name, title, and telephone/extension number of the person with whom you are speaking. All three of the large credit bureaus offer tools to register free online credit report disputes. The Federal Trade Commission (FTC) also offers a publication called “How to Dispute Credit Report Errors” for free on its Web site.
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Timing Is Everything
It is a good idea to check your own credit report and score before applying for any major line of credit or a home mortgage. That way you know exactly where you stand and you can address a mistake in your report if -- there is one -- before it hurts your application.
When you are reading through the report, pay close attention to the dates that indicate when a creditor last sent an update to the reporting agency. If you have recently made a sizable payment that substantially improved your credit limit to balance ratio, or wiped out a past due amount, check to see if it is listed.
If the most recent update from the creditor was before you made that payment, you might want to wait on your application or contact the lender and ask them to send a more recent update to the reporting agency.
Timing is everything. Your credit report might give one impression at a certain time and a different one a month later.
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Disputing Credit Report Errors
Consumers should check online credit reports on file with Experian, Equifax, and TransUnion regularly to ensure that the information the reports contain is accurate. The Fair and Accurate Credit Transactions Act, or FACTA as it's called, makes it easier to dispute incorrect information in your credit report. Consumers can deal directly with the credit bureaus to dispute errors. Each of the big three credit bureaus offers online, telephone, and mail channels through which to pursue disputes. You can visit the company Web sites for more information. Regardless of whether you choose to deal with the credit bureau or directly with the business, you should dispute incorrect information in writing, and you should keep copies of everything. And remember, fixing an error at one credit bureau does not mean it will be corrected at the others. If the incorrect information is included in more than one bureau's database, you will need to pursue your dispute with each bureau individually. For more information on how to dispute inaccuracies in your credit report, visit www.privacyrights.org. There are links to government publications and other resources that will help you iron out any problems.
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Anti-Virus & Firewall Protection
If you plan to check credit reports online for anyone in your household, remember that there are safety precautions you must take. The last thing you want is for someone to sneak in through the Internet and steal valuable information.
Make sure that all of your anti-virus software is up-to-date and running before checking your credit report online. Also, make sure all of your security firewalls are active. This will help to prevent someone else gaining access to the information contained in your credit report without your knowledge or approval.
You should also remember to close the file once you are finished looking at it. Do not leave it open on your screen for someone to walk by your computer and see. The best thing to do is close it and use password protection on the file folder you store the credit report on your computer.
If the importance of checking your credit report is obvious, so should the importance of protecting that information from prying eyes.
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Checking Your Own Credit Report
Not only can you check your own credit reports, you should check them regularly. You can order directly through Equifax, Experian, TransUnion, or any number of online credit report companies. Checking your own credit reports will not negatively impact your credit score. Keep in mind, though, that if you order directly, you will be charged a fee. If you'd rather receive a free credit report, you can order an annual credit report from each of the three big credit bureaus at www.annualcreditreport.com. When you check your credit reports, make sure it is error free. Sometimes information from other individuals can be inserted into the wrong record.
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Calculating Credit Scores
Credit scores are calculated using statistical models meant to predict future behavior in relation to credit and finances. A number of things factor into determining your score. These include the number and severity of late payments, your total amount of debt, the number of accounts you have, what type of open accounts you have and how long they have been open.
While your age, income and employment history are not factored into your overall credit report score, they may still be considered by a lender when deciding to approve you or not. Also, there are two types of credit scores.
The first is the generic score. This is arrived at with a standard statistical model used by the major credit reporting bureaus Experian, Equifax and TransUnion. Some lenders will use this number, while others will go a different route.
The custom credit score is one that is arrived at using the lenders own statistical model, in which they determine how much weight is placed on certain factors that are more important to them. Whichever model is used to determine a credit score, the lender is required to provide you with the reasons for not approving you if you are denied.
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About Credit Reports
A credit report is a compilation of information that serves as a persistent record of how you use, abuse and manage your credit responsibilities. It includes basic information about you, such as your name, address, telephone number, Social Security number, date of birth, and employment history. It also includes information on your credit payment history as well as public information such as tax liens, court judgments, and bankruptcies, if any. Credit reports are used by potential businesses and lenders to help determine your creditworthiness. If your credit report is generally positive, you will most likely qualify for better terms on any credit for which you apply. The federal government recently enacted legislation allowing consumers access to a free credit check once every 12 months from each of the three main credit bureaus. For more information, or to get information on an free instant credit report, visit www.annualcreditreport.com.
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Breakdown of What You Will Find in a Credit Report
Reading through a personal credit report for the first time can be a little daunting. There is a lot of information to go through and it's not like you're reading the next great American novel. But it is still very important and you need to pay close attention to everything in your credit report. So here is a rundown of what you will see in case you are scratching your head and asking yourself how to read a credit report.
The first section is for identification and has listed your name, date of birth, social security number, and spouse’s name if you are married. Make sure everything in this area is correct. If your social security number is wrong or your name is misspelled, the following credit report might actually be someone else’s.
The next section details your credit history. Specifically it lists company names, account types and numbers, the date an account was opened or closed, payment history, most recent activity on the account, balance, status and past due amounts.
The subsequent two sections lists any accounts that were referred to collection agencies in the last seven years and any public record pertaining to your history of meeting financial obligations. The last two areas list additional information like previous employers and residences, as well as a list of all businesses that have been provided with a copy of your credit report in the last two years.
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About Credit Scores
A credit score is a numeric value that most commonly ranges from 300 to 850 and that is calculated based on a number of different factors. The single-most important factor in determining your credit score is your past repayment history. Credit reporting data is maintained by the credit bureaus on more than 170 million Americans. Credit scores are calculated directly based off current credit data, then subsequently pulled by lenders. A score does not exist until they are ordered by a lender or consumer. Since there can be errors in the information contained in a credit report and the corresponding credit score, personal finance and identity theft experts recommend that you check your credit scores all three credit bureaus at least three to six times a year. Federal law entitles consumers to a free credit report and score from Equifax, Experian, and TransUnion once every 12 months.
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Credit Cards and Identity Theft
Credit card companies recognize the threat that identity theft poses to consumers and do take steps to protect their customers. For example, many credit card companies monitor usage patterns by consumers. If unusual charges appear on the account, the company may temporarily freeze the account and contact the cardholder to see if the charges are legitimate. Examples of unusual charges include charges at vendors outside the geographic region in which you normally use the card or a big-ticket purchase when you normally use the card for smaller purchases. Most companies also offer other credit card fraud protection services, such as issuing virtual numbers for online purchases. Your credit card company's Web site should include a full description of the identity theft protection services it offers.
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