2torial #0533:
Learn2 Clean Up Your Credit Report

Give yourself some credit

You could be among the 25 percent of U.S. consumers denied credit this year due to inaccurate information in a credit report. And unless you do something about it, these blemishes can affect your finances for years to come. However, there are things you can do to clean up your report, so when it's time to apply for any type of credit, you'll be ready.

Stop applying for credit cards or loans of any type until you've had a chance to access and review your credit report, especially if you've had a credit application turned down within the last month. Chances are if one company rejected your application, others will follow suit. And every time you submit a credit application, it appears on your credit report.

Too many declined applications can look negative, because lenders consider the number of credit applications to be an indicator of how much credit you're trying to obtain, and can conclude that you'll be an irresponsible user of credit if they see too many inquiries.

Keep in mind that credit reports and the mechanisms for cleaning them differ from country to country. This 2torial concentrates principally on the U.S.

Obtain your credit report

There are several credit reporting agencies, each with a potentially varied account of your credit history. And since each lender may employ different ones, it's recommended to request credit reports from at least two or three different agencies.

In the U.S., the most popular credit reporting agencies, known as "the big three," are Equifax, Trans Union, and Experian. Each has a toll-free number available by calling information, and a website, accessible by typing the name of the company into an Internet search engine. To get more information or learn about agencies and policies in other countries, visit a local library, or try one of these options:

A bank. Ask the loan officer what agency the bank uses and how to contact it.

A credit card. Call the phone number on the back of your card and ask for the name and address of the agency the company uses.

The Internet. By typing "credit report" into an Internet search engine, you'll find sites that list names and addresses of agencies, and online services that offer instant credit reports if you pay by credit card.

A credit counseling service. A good service will not only get your report, but will also provide education on how to read and fix it. When looking for a service, choose a not-for-profit one whose primary goal is education. Look in the yellow pages under "credit and debt counseling services," or type the same into an Internet search engine. Also, you can usually get a referral to one through your bank's loan officer, your accountant, or a financial advisor.

When you send a letter of request to a credit agency, include:

• Your full name

• Your date of birth

• Places of residence for the last five years

• Your social security number

• Day and evening phone numbers

• Your signature

• A copy of your driver's license, a utility bill, or another document that reflects your name and current address

Understand your report

Mortgages, bank loans, auto loans, credit cards, department store cards, and public records will show up on a credit report. Although each credit reporting agency may list information in a different format, standard data includes:

Applicant's information: Includes your name, age, social security number, and current and previous addresses.

Creditor and account number: Lists the name of each bank or credit card issuer and your corresponding account numbers.

E.C.O.A.: Stands for Equal Credit Opportunity Act, and is marked with an "I" for an individual account, a "J" for a joint account, or a "U" for undesignated (if the creditor didn't provide this information).

Date Reported: The exact date the listed information was extracted from the creditor's file.

Date opened or closed: Date the account was opened or closed.

High credit: The full amount of a loan or the limit on a credit card.

Balance: The current amount you owe on each credit card and loan.

Past due: Any amounts past due as of date reported.

C.S.: Reflects the current status of each account. "R" indicates revolving credit. "I" means installment credit. This letter is followed by a number, which indicates the status of payments: "1" means you are paying as agreed; "2" means your current payment is 30 to 59 days late; "3" is 60 to 89 days late; "5" is 120 days or more past due; "7" is paying or paid under a Wage Earner Plan; "8" is repossession; and "9" is collection or charge off.

Historical status: How often you were 30, 60, or 90 days late on a payment. If you were never late, a "0" will appear.

Public records: Can include bankruptcy filings, student loan defaults, property liens, and civil judgements against you. Data includes the court name, reference number, plaintiff, court code, and amount owed.

Inquiries: Displays who has viewed your report during the past two years.

Note: Savings and checking accounts don't show up on a credit report, although bounced checks sent to collection agencies will.

Fix blemishes

In the U.S., most items stay on your credit report for 7 years (10 in the case of a filed bankruptcy). This extended history makes it imperative to check regularly for mistakes. A quarter of all credit reports contain at least one, including mistaken identity, old or duplicate information, or a host of other incorrect facts.

If you find a mistake on your report, fill out a request for investigation form, which should have been included with your report. If you didn't get a form, send the agency a one-page letter instead; include your name, address, social security or citizen identification number, a detailed explanation of the error, and your signature. Also include copies of any supporting documents, such as statements, receipts, checks, and the like. If you don't have documentation, call the appropriate lender and request it.

Ask a creditor to remove an item. A creditor can also file a request with a reporting agency to have an item removed from your credit report. However, you'll have to call or write the creditor and request this action be taken. You'll likely have to show the creditor that you've earned this action by having an exemplary track record since the negative item was originally listed on your report.

Add an explanation. You have the right to add a 100-word statement to your credit report, which can be useful if your claim is rejected and you still believe a mistake was made. It's also useful if there are circumstances that may explain why, for a period of time, you had financial issues. Be aware, though, that credit agencies have the right to edit your statement, and will do so if it's more than 100 words.

Also be aware that your written statement is not automatically removed from your report after 7 or 10 years, like other information. This could work against you, as creditors might not even know of an outdated credit problem if it weren't for your statement. You do have the right, though, to have the statement removed any time you wish by completing a form available from the reporting agencies.

Once you submit a request for investigation form, the reporting agency has 30 days to verify it. If you haven't heard anything after that time, send a follow-up letter, along with a copy of the original request for investigation form, to the credit agency, and to your local office of the Federal Trade Commission. (Find the FTC's address by looking in the government section of your local telephone book, by asking a credit and debt counseling service, or by typing "Federal Trade Commission" into an Internet search engine.)

If another month passes without a response to your request, or if you disagree with the credit reporting agency's verdict, you have the right--especially if nothing else works--to contact the attorney general's office, or a lawyer, and ask for advice.

Build credit

Recent, positive marks on your credit report can lessen the effect of earlier negative ones. So, if you're feeling frustrated over the few credit card payments you missed 5 years ago, or the checks you bounced while in college, here are some things you can do to show potential creditors that, despite these trespasses, you're a good risk:

Pay bills on time. Pay at least the minimum amount due on each loan or credit card each month. Your goal is to develop a history of responsible bill paying. A credit or debt counseling service can also help with advice and budgeting strategies. Some offer consolidation loans at low interest rates.

Keep some accounts active. Even after you've paid off a credit card, keep it active instead of canceling it. Using it each month to charge $25, and then paying that amount off in full, will help establish a repayment pattern that reflects well on your report. If you cancel the card, you'll lose a means to prove to creditors you're a good risk. Limit this to one or two cards, though, as it's easy to dig yourself into debt.

If your credit is bad, and lenders won't take a risk on you, there are still things you can do to build credit, including:

Get a secured credit card. Banks offer secured cards to customers who have cash to use as collateral against the credit limit. For instance, if you have $2,000 in a checking account, you may get approval for a credit card with a limit of that same amount--it will, however, freeze the $2,000 for the length of the time you keep the card active. Secured cards are a means to build good credit history, and once a bank has seen that you've handled the responsibility, you can eventually apply for a regular card.

Have someone co-sign a loan. Recruit someone with solid credit to co-sign an automobile, house, or personal loan. Pay off the bills responsibly, and in time your credit history will improve.

Consider debt consolidation. Talk to a credit counseling service about merging all your outstanding debt together, so you receive only one bill (often at a lower interest rate). Be aware, though, that consolidation can look negative on your credit report, depending on how lenders choose to report it. Before consolidating, phone each of your lenders and ask them how they report such an action.

There's no time like the present to start the process of cleaning up your credit report. It may be frustrating, even a little intimidating at first, but think how good it'll feel when the only thing left to clean is your dishes.

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