Your Credit Reports - Financially Free in 23 part 4

Now that tax season is winding down, it is a good time to give yourself a credit check-up. Consumer credit is becoming more expensive. It is imperative that your credit reports are accurate.

Your credit reports affect more than just how much interest you’ll be charged on debt. It affects insurance premiums, rent charged, utility deposits, and much more. It’s important to know where your score comes from and the different ways it can be calculated. You also should know that the score you’re seeing may not be the score your lender is seeing.

Two major companies are responsible for billions of credit scores provided to lenders and consumers: FICO® and VantageScore® Solutions. The difference between VantageScore vs. FICO credit scores is subtle, reflecting each company’s special calculation.

The Fair Isaac Corporation, more commonly known as FICO, scores range from 300 to 850. The higher the number, the better your score. FICO scores are calculated based on how a consumer handles debt and weighted according to the following categories:

Payment history: 35%
Amounts owed: 30%
Length of credit history: 15%
Credit mix: 10%
New credit: 10%

FICO scores give the most weight to your payment history and amounts owed. FICO also considers your length of credit history, credit mix, and new credit.

FICO has multiple versions of their credit scoring models, and provides different scoring models to lenders that serve different needs. Credit card issuers, auto loan lenders, and mortgage originators may use different FICO scores to make lending decisions.

VantageScores range from 300 to 850, just like FICO scores. However, even though the scores are calculated on the same scale, a VantageScore will be different from a FICO score. That’s because the factors, and how they’re weighted, are a little different. VantageScores are based on:

Payment history: 40%
Depth of credit: 21%
Credit utilization: 20%
Balances: 11%
Recent credit: 5%
Available credit: 3%

Since many lenders use FICO Score and consumers often see VantageScores, some lending decisions can take consumers by surprise.

Under federal law, everyone is allowed to receive a free copy of their credit report once a year from each of the 3 national credit reporting bureaus, TransUnion, Equifax, and Experian. To obtain a free copy of your credit report, go to www.annualcreditreport.com. This is the federal government’s only officially sanctioned source for obtaining your free annual reports. This web site shows you how to get your once-yearly FREE credit report from each bureau, but you can only use it once every twelve months. You may apply by telephone or mail. (Consumer alert: Your FICO scores are not included in your annual free credit report. You will receive solicitations to purchase your FICO score, however, the only source of receiving an accurate FICO score is directly from the three credit reporting agencies or from a lender.)

The first thing you should do is check all of the personal information shown on all 3 credit reports. Make sure they are all accurate. Check all accounts that are in good standing. Make sure they are all yours. Check all negative accounts. Make sure they are all yours. Then, check all public records. Make sure they are all yours. Finally, examine the list of everyone who has accessed your credit report in the past 2 years. You should have given each of them written permission to access your credit report. If an employer or potential employer has obtained a copy, it should be listed. This is one way you have of verifying whether or not an employer has reviewed your credit report.

We have designed the Credit Report Accuracy Quick Check table to help you quickly determine whether or not everything on your credit report is correct. You should use one for each credit bureau’s report.

Credit Report Accuracy Quick Check
Experian ____ Equifax ____ TransUnion ____
	Accurate?
Section	Yes	No	# Items to Dispute/Correct
Personal Information
Name
Social Security Number
Addresses
Telephone
Spouse’s First Name
Employers
Potentially Negative or Adverse Information
Public Records
Credit Items
Positive Accounts
Credit Inquiries

Correcting inaccurate information on your credit report is a very time consuming and frustrating process. It is not unusual for it to take 4 – 6 months to correct items on your credit report. This is the primary reason so many people allow incorrect information to remain on their credit reports. This is also the reason why some people will retain the services of a credit correction firm.

Disputes can be made over the telephone, via the credit bureau’s online investigation request file, or through the mail. The credit bureaus prefer disputes submitted via their online program, but it is not necessarily the best way because you do not know if your dispute was received and investigated until you receive a reply. The recommended way of disputing an item on your credit report is via certified mail.

The letters you send will identify all inaccurate items and specifically require the bureaus to verify the information on your report. Information that cannot be verified by the bureaus must be deleted. Information that is incorrect must be corrected. This allows you to correct the many mistakes that appear on most credit reports.

Prepare a dispute letter. The following is a sample dispute letter.

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, 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.)

Source: Federal Trade Commission’s Consumer Credit Briefcase

Make sure you attach a list of all supporting documentation to prove the validity of your dispute along with a copy of each document. For example, if you are disputing an account that is in collections that you had paid in full, you would list the name of the creditor, the item number on the credit report, the account number shown on the credit report, then state why you are disputing the information on the credit report. You must then attach at copy of your receipt for payment and letter from the creditor acknowledging that payment was made in full.

Dispute Letter Attachment
Creditor	Item #	Acct. #	Dispute and Expected Resolution

XYZ Co.	15	123456	Account paid in full. Change status from open and delinquent to closed, paid in full.

The credit bureaus have 30 days from receipt of your letters to verify the disputed items if your credit report has resulted in adverse action. If you are disputing information received in a “free” credit report, they have 45 days in which to verify any items you are disputing. In some cases, they may request additional time. If you receive a request for more time, review it carefully, and make a copy for your file.

Review the reply from the bureaus. Each credit bureau will, a) verify that the disputed information was correct; b) change the disputed information so that it is correct; c) request more information; or d) remove the item. Each bureau MUST reply in writing. Experience has shown that the bureaus will probably request additional information not only about the item in question, but to verify you are who you say you are.

Review the updated report. Once the credit bureaus have reviewed any requested additional information, each bureau must send a final notice indicating exactly what action they took: whether they verified information, changed items (and exactly how), or removed items. When you get the final report, review it carefully. If it is satisfactory, the process is complete. If not, review it carefully, make a copy for your file, and resend your request for corrections. The more documentation you send to support your claims, the better.

Repeat the process. The credit correction process can be repeated as many times as is necessary to correct your report so that it accurately reflects your good credit. You may find that if there is the same error on more than one credit bureau’s report that you have disputed, one might correct it while another may not. You may want to send a copy of the corrected item from Bureau A to show Bureau B how the item should be reflected.

If all the corrections are made on the first round, it may take 60 days or so. However, usually two or more tries are required to get all the changes made. It is not unusual for the process to take many months.

If deleted items get re-listed on your credit reports, you must be notified prior to a credit bureau re-listing items. Then the item would simply need to be re-challenged. If it was wrong the first time, it will be a simple matter to have it deleted again. If the credit bureau or creditor does not comply, you should contact an attorney to press a civil lawsuit.

How To Improve Your Credit Report

You receive an “inquiry” on your credit report each time a report is requested. In general, credit inquiries can hurt your credit. They can hurt your FICO scores by up to 12 points or more per inquiry, and can remain on credit reports as long as 2 years. While employers do not see your FICO score, they do see credit inquiries. It is important to note that your credit score is not hurt when a prospective employer pulls your credit. You may be relieved to know that employers or prospective employers will not see what other employment inquiries have been made.

While there are no guarantees that the suggestions presented in this section will improve your credit report, most people find them helpful. The most important things you can do to improve your credit report are:

- Make sure the report is accurate.
- Pay your bills on time.
- Pay more than the minimum amount due.
- If you have accounts that are in collection, pay them. If the collection is in dispute, be able to document your position. Paid collection accounts may not improve your credit score, but they do make a difference to employers.
- Do not exceed your credit limit. Ideally keep your balance under half of your credit limit.
- Be honest with yourself, your creditors, and employers when asked about potentially negative items on your credit report.

State laws can impact access rights, fees, notification requirements, and other rights. Experian has links to consumer notification of rights for states that require them. Not all states require credit bureaus to notify consumers of all their laws regarding consumer credit reports. If you have a question you may want to contact the Consumer Protection Agency for your state.

If your credit score was used to deny you credit or the best loan terms, the lender/creditor to whom you applied must now provide you a copy of your credit score upon which they based their decision.