Financial Capability Step 6: Clean Your Credit

Credit is a major part of personal finance. Keeping your credit clean is easier said than done. Make sure to check your credit quarterly for errors and erroneous reporting of accounts and personal information. If you find an error be sure to dispute it.

 

Many of us have score impacting errors on our credit reports. In fact, this is the reason that a good number of us can have a 50 point swing in our 3 credit scores from the three credit reporting agencies.

If you find an error on your credit reports, you’ll need to know your rights. Your most effective weapon in dealing with the credit bureaus is the Fair Credit Reporting Act (FCRA). Legally, the FCRA protects you by requiring credit bureaus to furnish correct and complete information to companies requesting credit histories for evaluation. If you find an error on your report, simply follow these steps:

  • Write to the credit reporting agency disputing the item and include any supporting documents. Keep a copy of all documents for your files.
  • When the credit reporting agency receives your letter disputing the item, they must investigate the item in dispute (usually within 30 days) by presenting the information you submit to the creditor.
  • By law, the creditor must review your evidence and report its findings to the credit bureau.
  • The credit bureau must then give you a written report of its investigation and a copy of your report if the report results in a change.

You can also fill out an online dispute form provided by the credit bureaus. I prefer offline filing as it allows you to keep a paper trail. The websites for the three major credit bureaus are:


Since it’s a lot easier to correct bad data than to change your actual behavior, this is an important early step towards credit management.

Your most effective weapon in dealing with the credit bureaus is the Fair Credit Reporting Act (FCRA). You can read it if you’d like but here’s the skinny. Legally, the FCRA protects you by requiring credit bureaus to furnish correct and complete information to companies requesting credit histories for evaluation.

If an item on your report is found to be an error and is corrected, you can request that the credit bureau send corrected copies of your report to any creditor who received your report in the previous six months or any employer who received your report in the previous two years. If you are not satisfied with the results of a formal dispute, you can also seek resolution with the source of the information.

To do this, write to the creditor disputing the incorrect entry. After receiving your letter, the creditor may not report the information without including a notice of your dispute. In addition, once you have notified the source of the error in writing, it may not continue to report the information if it is an error. You can use a company to do this for you. Many companies charge a lot of money and all they do is get power of attorney and write letters on your behalf. This is fine because you have to make sure that you stay within a certain timeframe when making disputes. We all know life gets in the way and if you try to do it yourself, you may miss an important deadline. If you are prudent and feel that you can handle this yourself, then go for it!.

If you opt for a company to do it for you, read the fine print and be aware of any add-on charges before you sign a contract with them.

Dispute Consumer Credit Reporting Errors and Fix Your Credit Report

The three credit reporting bureaus deal with a substantial amount of information daily. As a result, mistakes can occur on your credit report. By requesting and reviewing the free annual credit reports from each of the credit reporting bureaus, you can be on the lookout for errors that may exist on your report.

Watch out for the following types of errors on your credit report:

  • Information that does not belong to you. This type of error is not only a concern for identity theft victims, but for everyone. Those with common names and those with a junior or senior suffix attached to their name may also find information that does not belong to them. Regardless of the nature of the information (positive or negative), you should work to correct it.
  • Inaccurate dates. Making sure dates are accurate is particularly important for credit accounts with derogatory information because the date of the event is the basis for when the negative information will be removed from your account.
  • Old information. Don’t assume that old information has been removed from your report; see for yourself that the matter is taken care of.
  • Other incorrect information. Account balances, payment dates, and credit limits (especially if you’ve consolidated accounts) should be checked for accuracy.

What to do if you find an error on your credit report

The Fair Credit Reporting Act (FCRA) protects consumers’ rights by requiring credit bureaus to furnish correct and complete information to companies requesting credit histories for evaluation. If you find an error on your credit report, there are some steps you can take:

Write to the credit-reporting bureau disputing the item and include any supporting documents. Send copies of the documents, rather than originals, and keep the originals for your records. You can also visit the credit bureaus’ Web sites and fill out their online forms.

When the credit reporting agency receives your letter disputing the item, they are required to investigate the item in dispute (typically within 30 days) by presenting the information you submit to the creditor. By law, the creditor must review your evidence and report its findings to the credit bureau.

If the report results in a change, the credit bureau must give you a written report of its investigation and a copy of your report. If your request to remove an erroneous item on your credit report is denied after going through the dispute process, you may add a statement (100 words or less) to your file giving your version of the dispute. The credit bureau must normally include a summary of your statement in future reports.

Before you try disputing the negative information on your report, know that this works only for errors. In fact, credit-reporting agencies often flag suspicious disputes. The only way to remove accurate but negative information is to wait.

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