Financial Resolution: Clean Up Your Credit

 

You have more than enough to clean up already, but this will keep money in your pocket.

You might have big plans for the coming New Year. Maybe you want to buy a new car or home. Perhaps you begin paying for your child’s education this year. Whatever the reason, wouldn’t you like to get the lowest possible interest rates on those loans? If so, then your credit report needs a little spring cleaning.

Even if you don’t plan on doing any of those things in 2017, you should still clean up your credit report because there might be an error on your report. In 2012, a study by the Federal Trade Commission showed that you might have at least one major error on your credit report. There were 1,001 people randomly selected for this study. Twenty-six percent of the 1,001 participants or 262 people found at least one major error after reviewing their reports from three sources.

This is not surprising. A follow-up study in 2015 showed that of the credit card system, the 3 nationwide credit reporting companies have details on 200 million consumers, according to data provided by around 30,000 furnishers, from public offices to college agencies. In essence, there are many places for incorrect data to surface.

How to Build Credit Without Credit Cards

Yes, you can build credit without a credit card.

Cleaning up your credit report is actually a straightforward process.

Begin by contacting the credit bureaus the old-fashioned way. Cassie Price with a silent partner owns Wealth Generation Collective (debt negotiation and credit repair company) in Sandpoint, Idaho, suggests that you don’t phone or use any online dispute systems.

She recommends using snail mail for correspondence unless there are issues getting items removed from your credit report. She suggests using certified mail in such instances.

Price states that if you call or use the credit bureau’s online dispute system, there is no legal record of your correspondence. Even if the call is recorded, it might present legal issues. The 3 addresses she recommends writing to are as follows:

 

TransUnion LLC Consumer Dispute Center

PO Box 2000

Chester, PA 19016

 

 

Experian

P.O. Box 4500

Allen, TX 75013

 

Equifax Information Services LLC

P.O. Box 740256

Atlanta, GA 30348

 

 

Price suggests that you write your name, previous address (within two years), current address, date of birth and social security number in any letter you write. You should also highlight the issue you have on a hard copy of your credit report.

A good thing to include would be a copy of your passport, ID such as driver’s license and a utility bill that includes your name and present address. Doing this will guarantee that the credit bureaus do not throw away your letter as being frivolous.

Price suggest keeping the letter simple and to the point.

For example, begin with, “This account from ABC Inc. for XYZ is wrong/does not belong to me/ etc.”

Next, you state what action you want the bureau to take like, “Please correct and update my credit report/remove/verify and update, etc.”

Give them proof. If you have hard proof that there is an error or many errors on your credit report, send it in with your letter. It could be a wrong address or maybe your credit report is mixed up with someone else’s. It could even be a debt that you know you never had or owed.

Becky House at American Financial Solutions (a credit counseling company in Bremerton, Washington) where she is the education and communications director suggests that you show that there is a mistake.

It could be challenging providing paperwork, especially if you don’t owe that debt, but paperwork might actually prove your innocence in some cases, House states. Examples include a creditor’s statement, a lease proving that you didn’t live at a particular address that was shown on a creditor’s statement or a receipt that shows that the account was paid in full or the payment was made before the due date.

In 1970, the Fair Credit Reporting Act was established and it states that credit reporting agencies have to review and respond to all disputes in 30 days or less. If you don’t get a response, the error you are disputing that was never paid goes away. This sounds great and many individuals and unscrupulous credit repair companies questioning every statement that sheds a bad light on the customer and hope there is no response within 30 days. This approach can actually clean up credit reports for some people.

This might only be a temporary fix. Industry experts state that once there is a resolution by the credit bureau and if the debt that was disputed is still outstanding, it will reappear on your credit report.

House states that this approach might actually make things worse and there are lots of risks involved.

House has cited many cases where this kind of dispute has backfired on the consumer. Recently in her “Understanding Credit Reports and Scores” class to an electrical apprentice group, she talked to someone who tried to clean up his credit report by having outstanding debts removed.

A credit repair company advised him to dispute every account in collections. House said that one of the accounts was about 4 to 5 years old. After he disputed his account, his info on file at the credit bureau was updated.

That doesn’t sound too bad, right?

House said that the company sued him and there is now a judgment against him and his wages are being garnished. He now owes much more and the interest is 12% per year and he also has to pay attorney fees. If he didn’t dispute the account, it is very likely that the company wouldn’t have pursued him

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