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How Healthy Is Your Credit?
By: James Dimmitt
There’s only one way to discover the “health”of your credit. You need to examine
your credit report. Your credit report is your “consumer identity” that
potential lenders will use to judge your credit worthiness.
Use these tips to give your credit profile the “tune-up” it needs:
Tip #1- Check for Errors
Your credit report or profile is more than just a collection of who your
creditors are and how much you owe them or have paid them.
The first thing you need to do is carefully check that your credit report is
accurate. Nearly 70% of credit reports contain errors.
These errors may be as simple as an incorrect middle initial or address. Or it
could be as serious as a creditor reporting that you were late with a payment
when in fact you were not late at all.
This error might not seem like a big deal to you. However,to a future lender
like a mortgage company it makes a big difference!
Carefully examine your credit report and if you find an error contact your
creditor and the credit bureaus. Catch and correct these errors now before it
hurts your chances of securing credit in the future.
Tip #2 - Correcting Errors
The two most common errors contained in credit reports are:
1) wrong account information
2) incorrect recording of late payments.
If you find an account reported that does not belong you, you need to contact
the credit grantor or issuer immediately. Remember, finding accounts that you
have not personally opened is a sign of possible identity theft.
Hopefully you’ll discover that this error is nothing more than an oversight and
not an identity theft problem. Most often this occurs when they report an
account belonging to a family member or someone with a similar name on your
credit report.
If your problem is an error in reporting a late payment you will need proof to
back up your case before this error can be corrected or removed. The most common
error occurs when a payment is reported as “late” when it was actually a current
or “on time” payment.
In either case, the problem can and should be corrected. You will need to
correct the error in writing. Keep a journal or log of all calls and
correspondence.
The Fair Credit Reporting Act (FCRA) requires the credit bureaus and the agency
reporting the information to the credit bureau to correct inaccurate information
in your credit report. Therefore, it is important that you contact both the
credit bureau and the creditor whose information is in dispute.
A sample letter is included here to help you in correcting your credit profile.
Make sure that you clearly identify the information that you dispute, include
copies of receipts or documents that support your position. Then request that
the information be corrected or deleted from your file.
Send your letter by certified mail and request a return receipt from the
recipient. Keep all correspondence that you mail out. Give the agencies involved
30 days to begin their investigation. You can call them but be aware that
phoning them does not protect your consumer rights! You must notify them in
writing to protect your rights.
They must notify you of the results of their investigation. Although the process
will take time, it’s important to do it. This is your credit profile, your
“consumer identity” that is at stake. Don’t expect an error to correct itself.
At your request, the credit bureaus must send notices of corrections to your
credit profile to anyone who has requested your report in the last six months.
If you applied for a job and were turned down because of inaccurate information
in your credit report, you can have the corrected report mailed to anyone who
received a copy in the past two years.
Sample Dispute Letter
Date
Your Name
Your Address
Your City, State, Zip Code
Complaint Department
Name of Credit Reporting Agency
Address
City, State, Zip Code
Dear Sir or Madam:
I am writing to dispute the following information in my file. The items I
dispute are also encircled on the attached copy of the report I received.
(Identify item(s) disputed by name of source, such as creditors or tax court,
and identify type of item, such as credit account, judgment, etc.)
This item is (inaccurate or incomplete) because (describe what is inaccurate or
incomplete and why). I am requesting that the item be deleted (or request
another specific change) to correct the information.
Enclosed are copies of (use this sentence if applicable and describe any
enclosed documentation, such as payment records, court documents) supporting my
position. Please reinvestigate this (these) matter(s) and (delete or correct)
the disputed item(s) as soon as possible.
Sincerely,
Your name
Enclosures: (List what you are enclosing)
Originally Posted at http://www.ftc.gov/
Tip #3 - Budget Planning
You can also use your credit report to help you plan and implement a personal
budget. Your credit report will show you where you are spending your hard earned
dollars. While the credit card balances may not be completely current, you’ll
still see which of your cards has the highest balance outstanding.
If you have more than one major credit card you should compare the annual
percentage rate (APR) you are paying on each account. If you are working on a
budget to “pay down” your credit cards, start by paying down the one with the
highest APR or interest.
Once that credit account is paid off, move toward paying off the account with
the second highest APR. Using this method you will be able to concentrate your
efforts toward paying down your outstanding credit obligations.
You should also check with your credit card company to see what’s the best
annual percentage rate (APR) they can offer you. If you are a good customer, you
can often qualify for a lower rate than what you are currently being offered.
Caution: Ask if the new rate you are getting is a “promotional” rate or a
“contract” rate. A promotional rate will expire at the end of the promotional
term, for example 6 months. A contract rate does not have an “expiration” as
long as you continue to meet the terms outlined by your creditor for that rate.
Tip #4 - Making a major purchase
If you are considering a major purchase such as a car or a home, checking your
credit report gives you the chance to see what a potential lender sees and uses
to judge your credit worthiness.
You want to make sure that your credit report is accurate before you apply for
that sports car or new home. Errors or problems can be corrected before your
lender can use those against you and deny your credit request. You’ll also have
a better idea of what type or rate of credit you should expect from a potential
lender.
Tip #5 - Check your credit report regularly
Check your credit report regularly. Guard your “consumer identity” as you would
anything else you treasure. Use your credit wisely, along with these tips, and
you will enjoy the benefits that your good credit and your good name deserve now
- and for years to come.
About the Author:
© 2005, http://www.yourfreecreditreportnow.com Author: James H. Dimmitt James is
editor of “To Your Credit” a FREE weekly newsletter focusing on managing your personal finances and credit. Subscribe and get a FREE copy of your credit
report when you visit: http://www.yourfreecreditreportnow.com |
