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Business Observer Thursday, Feb. 26, 2015 3 years ago

How to improve your credit

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Do surprises lurk in your credit score? How to find them and fix inaccuracies.

In a segment that aired on Sunday, Feb. 17, 2013, Steve Kroft from “60 Minutes” reported that a recent Federal Trade Commission study shows that an estimated 40 million people have errors on their credit report. To further the problem, the credit bureaus are difficult to reach and there is no one there to help consumers fix their problems.

All three major credit bureaus (Experian, Equifax, & Transunion) give consumers the ability to dispute derogatory or negative trade lines through their websites. This is required by the federal government. However, because the credit bureaus give us the ability to do this doesn't mean they are an advocate of the process or are working on our behalf to help us clean up our credit reports.

Here is why and its basic logic. The credit bureaus do not generate revenue or make a profit by having to address negative items on our credit reports even if they are erroneous or obsolete. This process is a huge expense for these companies. It's simply a downside of their business. Therefore they are not going to make it easy.

Pull Your Own Credit Report and Check These 5 Items
One of the most important things to do regarding one's finances is to check your credit report periodically. Learning how your credit usage and payment history impacts your credit score can help you keep your credit score as high as possible. Understanding the factors that can lower your credit score can help you set financial goals.

You can get a free credit report at www.annualcreditreport.com. You are entitled by law to a free credit report each year from each of the three major credit bureaus, Experian, Equifax and Transunion.

When reviewing your credit report, pay close attention to these five areas of information to make sure your score isn't being adversely affected:

Personal Information - Check your full name and any variations, your spouse's name, birth date, Social Security number, current and past addresses. If there are any misspellings or an incorrect address, these items might have been listed when a lender reported the data inaccurately, and can be corrected. It is important to correct these items especially if you have a more common name as creditors of another person with a similar name, even a relative, may wrongly report their information on your credit report.

Current Accounts - Each of your active accounts, such as mortgage loans and credit cards, will be listed along with the date the account was opened. They will appear as “in good standing” if you're current on your payments, or “delinquent” if you haven't paid your full monthly payment due or even show late payments from previous months or years. This information can remain on your credit report for up to seven years.

Closed Accounts - Closed and inactive lines of credit frequently still appear on your credit report. These items will stay on your credit report for different lengths of time but also up to seven years.

Hard Inquiries - Hard inquiries occur when a lender checks your credit as part of the approval process. Having too many hard inquiries could mean that you are overextending yourself, which could potentially lower your score. Furthermore, hard inquiries are the result of you requesting additional lines of credit from a lender. If you didn't authorize the inquiry, this could be a sign of identity theft.

Soft Inquiries - Soft inquiries are typically made by companies that want to check your credit score to make a decision to market to you their line of credit, such as credit card companies, retailers, and car dealers or manufacturers. These soft inquiries do not affect your credit score.

Steps toward fixing your credit
First, they are going to require that you prove your identity. If you cannot prove you are who you are, they are not going to allow you to submit a dispute. There is actually a very valid reason for this, identity theft. The bureaus are not going to send updates on your credit report, giving personal financial information to someone that they are not sure is you. Therefore, be prepared to answer random questions that will give the bureaus enough information to validate that you are who you say you are.

Then you will have to provide a valid reason for the dispute. What is valid to you is not necessarily valid to them. For instance, because you co-signed for a loan or credit card for someone and they didn't pay is not a valid reason to have the item removed from your credit report, nor is being deployed on active duty in the military, or going through a divorce. There are valid reasons for disputing an item, such as the account wasn't yours. But the credit bureaus are not going to publish this information.

If you are successful in submitting a dispute through the credit bureau website or writing a letter, and you receive an update from the bureau verifying the accuracy of the account on your report and thus stating that the information will remain unchanged, don't give up there. This is the biggest mistake consumers make when trying to dispute items on their own. Dispute it again. Make the credit bureaus contact your creditor and have the creditor respond again. Do it several times. In some cases when the creditor sees that you are not giving up they will simply not respond to the bureau(s). When this occurs the item must be deleted from your report.

Many consumers make the decision to pay for a professional company with a good track record to go through all of this for them because it can save lots of time and frustration. Companies that have been in business for several years know exactly how to navigate through this process, the proper dispute reasons and codes, the acceptable proof of identification needed, and will not give up.

Cheryl O'Neill Gowen is president and CEO of Alternative Funding Options. She works with business owners seeking cash flow from non-traditional sources, drawing on more than 30 years' experience in banking, financing and staffing. Contact her at:{encode="[email protected]" title="[email protected]"}.

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