When it comes to your credit report, there's no time for slacking off

Your credit report - and therefore your credit score - can open many doors. Or… it can slam them shut. Those doors not only determine how much interest you pay when you borrow money, but can also determine where you live, where you work, and how much you pay for insurance. You might be the nicest person around, but to a lender, a businessperson, or a landlord, you are a stranger, and all they have to measure you by is one little number, your credit score. It’s an indication to the world of how responsible you are. Fair or not, that may be the only criteria used. With that being said, do you know what’s in a credit report and what a credit score (also known as a FICO score) really is?  To stay on top of your credit report and to guard against identity theft, you need to know what factors affect credit.

 
Your Credit Report and Score
 
FICO is an acronym for Fair Isaac Corporation, the company that developed the scoring model used by the three big credit reporting agencies (Experian, Equifax, and Trans Union).
 
When a lender checks your credit, your information is compared to thousands of other consumers, and, based on where you stand, you’re assigned a score. The score is a three digit number (the scale varies depending on the credit bureau) that tells the public what kind of credit risk you are in relation to the other consumers in the database. And how you handle your money is often used as a measure of general responsibility.
 
Credit bureaus glean information from many sources, and sometimes those sources get it wrong. That’s why it’s important to know what is in your credit report. How do you do that? Start by requesting your free credit reports on an annual basis. You probably know that the law entitles you to a free copy of your credit report once a year. Be sure to use the link provided here - other credit report providers are in the business of making a profit and will offer many payment options for your "free" reports. Since there is no guarantee that the three credit bureaus will have the exact same information, you need to get copies from each of them. 
 
Can there be errors in your credit report? Of course! Errors happen everywhere.  Some of the most common errors that show up in credit reports include:
 
·         Out-dated information, such as an account that is paid off showing up with an unpaid balance.
 
·         Failure to record agreements regarding disputes that have been resolved in your favor.
 
·         Information about another person that shows up on your credit report.
 
Suppose you do find errors. What do you do first?
 
Contact the credit bureau that reported the error. Do this in writing and send it by certified mail. See below for a sample dispute letter from the Federal Trade Commission.  
 
The letter should inform the credit bureau of the error, and should include your name, address, and a copy of your credit report. On the report, clearly identify the items you are disputing, state the facts which explain why you dispute the information, and request that the erroneous information be deleted or corrected.
 
Provide the credit bureau with copies of your evidence, such as a credit card statement showing the correct balance and when an account was paid off. Or if someone else’s credit information landed in your credit file, you may need to confirm your name and Social Security number to the credit bureau.
 
Also, in the event you disagree with something in the report that you cannot have removed, ask the credit bureau to add your comment -- up to 100 words – to your credit file, so that anyone viewing your credit report will know there is more to the story.
 
Ask the credit bureau to send you an official correction form that you can use to describe the problem and request a resolution. You can also download these forms from the credit bureau Web sites.
 
Notify the creditor that provided the erroneous information and request a correction. Do this in writing, and include copies of your evidence. The creditor is obligated to investigate the error and report their findings to the credit bureau, though be aware… it takes time.
 
Check with the other credit agencies and inform them of the error, even if the mistake does not show up on the credit report you got from them.  If the erroneous information shows up later, you’ve already alerted them to the mistake.
 
Give the credit agency 90 days to correct the error and to send you a new report. If they do not send you one, request a new report, and be sure to explain that you are checking to see if an error was corrected so that you will not be charged for the report. 
 
Don’t relax too soon. Staying on top of your credit report is an ongoing process. Credit bureaus have massive databases that are updated regularly, and that means that there are many opportunities for errors to land in your credit file.
 
Not only will diligence pay off by ensuring that only accurate data is used to judge your reliability, but it will also serve as an alert if unauthorized persons have gained access to your personal financial information. As identity theft continues to grow, the need for vigilance becomes more imperative every day. 
 
SAMPLE DISPUTE LETTER FROM THE FEDERAL TRADE COMMISSION
 
Date
Your Name
Your Address, City, State, Zip Code
 
Complaint Department
Name of Company
Address
City, State, Zip Code
 
Dear Sir or Madam:
 
I am writing to dispute the following information in my file. I have circled the items I dispute on the attached copy of the report I received.
 
This item (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.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be removed (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 and 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.)
 

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