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Get Out Of Debt in 2012: Fix Your Credit Report

We have been going through the process of getting our finances in order so that we can get out of debt or be well on our way to being debt free in 2011.  Your credit goes hand-in-hand with your debt, so we would be remiss if we forgot to pause at this point and see what’s going on with our credit profiles.

Your credit score can have a huge impact on your debt, because it ultimately determines the cost of borrowing money and your interest rates on your credit cards.  The lower your score, the higher your interest rate, the more it will take to pay off your debts.  But if your credit report has inaccuracies, your credit score can be negatively affected.  This week we learn how to fix your credit report.  It’s not rocket science, but to those of you who have never taken the time to look at your credit report, this will be helpful.

There are three major credit bureaus in the United States.  They are: Experian, TransUnion and TRW.   These three agencies create profiles of your based on your debt.  That profile is called your credit report.  The credit bureaus also determine how much of a financial risk lending to you will be, and assign a number to your profile based on that scale.  They call that risk assessment your credit score.  Creditors will often pull credit scores from multiple sources to get an accurate profile on your spending habits since each agency uses its own formula to come up with a score for you.  You have probably heard of the FICO score.  That is the number that most creditors cite when they refer to your credit score.  It’s an amalgam of the scores from each credit bureau. We won’t talk too in depth about that today, but we will in the future.  Now, let’s look at your credit report.

Did you know that you are entitled to a copy of one report from each agency one per year…for free? If you go to the individual websites of each of these credit bureaus you won’t see free option for getting  copy of your credit report unless you sign up for some credit monitoring program.  That’s not what I’m talking about.  You can only get a free copy of your report by going to annualcreditreport.com or my calling all 1-877-322-8228.  That’s it.  Anywhere else that you go to will want to sell you something or will sign you up for a 30-day monitoring program that they will charge you for if you don’t cancel in time.

What I like to do is pull one report from one agency every four months, that way, I have access to a report year round versus pulling all three reports at once and then having to wait another 365 days for another chance to access a report for free.  If you’re thinking of making a big purchase, or have recently been a victim of identity theft, I would suggest that you pull all three at once.

You will notice a few things on your credit report including: current and pass addresses; your telephone number; possibly an employer name; currently open credit cards; closed credit cards; open and closed loans and lines of credit; any creditors who have accessed your report (usually because you applied for credit) within the past two years; and your own credit pulls.  It’s a lot to digest if you haven’t looked at it before.  Even if you have, it’s often easy to overlook things.

The first few things that you’ll want to check for are inaccuracies.  They can exist with everything from your name to random addresses that you’ve never heard of or even credit cards that you’ve never had or seen.  If those inaccuracies exist, you can file a request to have them removed.  The creditor who reported that information will have to verify the accuracy of the information that they reported.  They typically have 30 days to respond to your request.  You may be asked to provide supporting documentation, so don’t ask for things to be removed that are accurate.

You will also want to look at your payment history.  If your creditor has reported a payment as being last past thirty days, it will show up on this report.  I’ve found that if it happened one time, as you call your creditor, they can sometimes remove the late payment report for you.  It’s all in how you ask and how nice the person on the other end is…and your payment history. You should also make sure that credit lines or liens that you have paid off show as being paid.

If there is a negative mark on your creditor report such as a charge off, a delinquency, a judgement, etc., it usually stays on your report for seven years from the incident date.  The exception is a bankruptcy filing which stays for ten years.  It’s not pretty.  The good thing is that the older that event gets, the less impact it has on your credit profile – provided that you’ve paid your bills in a timely fashion.  If you have paid off

I’ve probably bored you to death by now, so I’ll stop.  The moral of this week’s lesson is to be vigilant.  Check your credit reports.  Have inaccuracies removed and corrected as quickly as possible.  Removing a bad mark can make a world of difference.  For a wonderful and handy guide on understanding your credit report, the Federal Trade Commission puts out a handy guide book called Build A Better Credit Report (PDF).  It’s a quick read and has great advice on improving your credit.

If at any time you’d like to catch up to this course, or if you want to begin from lesson 1, you can always select the “Get Out Of Debt Course” under categories. Everything will be nicely organized for you in order of appearance. Remember, let’s make this a GOOD 2012.

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4 Comments

  1. I’ve had “negatives” removed if there is some “gray area” surrounding the circumstances which led to the negatives landing on my reports. For example: cell phone company jerks me around, I cancel the contract early, they stick me with their infamous “don’t cancel early or we’ll screw you” fee. I don’t pay the fee, then they report me to the credit bureaus. In circumstances like this – where it becomes your word against the company that reports you – dispute the negative. Try to dispute more than once if the first reason you gave for your dispute doesn’t satisfy the bureau. In a world where shady companies use the “you’re bad, so we’ll report you to the bureaus” threat, the consumer has some say in what lands on his/her report.

  2. You can also get a lot of negative removed simply by asking for written verification. By law the credit bureaus must provide this verification to you or remove the item, which they do quite often.

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