How to Clean Up Your Credit Report
Whether you’re in the market for a new car, seeking approval for a credit card, or interested in buying a home, potential lenders or creditors will all be looking at the same thing: your credit report and score.
This one financial document offers a peek into how well you’ve handled credit in the past and how much of a credit risk you may be now.
Negative information can not only keep you from landing optimal loan terms and interest rates, but it could also lead to flat out denial.
No one wants to discover these costly mistakes through a loan or credit denial.
That’s why it’s important to know how to read a credit report, discover what’s on yours, and move through the clean up process without the added pressure of needing to move or make a major purchase now.
What Is a Credit Report?
Looking for errors is tough when you aren’t even sure what is on a credit report to begin with. So let’s start with the basics.
This section of a credit report is straightforward -- it’s simply the basic information about you. This may include:
- Address (current and previous)
- Telephone number
- Social Security number
- Employment information
- Driver’s license number
Updates to this section are made using the information you give to lenders.
There may be reported variations on things like your name or Social Security number if forms were filled out or information relayed incorrectly. These may be kept on your report to ensure an account stays linked to you.
While it’s important to look for inaccuracies, this section of your report doesn’t impact your score.
This is where you will find all information pertaining to accounts in your name. Lenders and creditors report a few key pieces of information like:
- Account type (credit card, auto loan, etc.)
- Account number (or a portion of the account number)
- If there’s a cosigner on the account
- Date opened
- Loan or credit amount
- Balance or amount still owed
- Monthly payment
- Payment history
- Account status (open, closed, etc.)
If you or a third party has made an inquiry into your credit within the last two years, this is where you will find that information. This includes:
- Voluntary inquiries (inquiries initiated by you when seeking new credit or when checking your own credit)
- Involuntary inquiries (inquiries made by third parties for things like pre-approved offers)
This section is important because several new voluntary inquiries could indicate to lenders or creditors you are currently under financial distress.
(Sick of receiving those pesky pre-approval letters? You can choose to opt-out for five years or permanently.)
Public Records and Collections
If any section presents a red flag to lenders and creditors, this is it. In fact, anything in this section is a reason for pause. This is where you will find:
- Debt sent to collections
- Monetary judgments
How to Get Your Credit Report
Before you pay for a service to check your credit report or score, stop. There are now several different ways to get the information you need, free.
Federal law states you are entitled to one free credit report annually from each of the three credit reporting agencies: Experian, Equifax, and TransUnion. This will allow you to see your full report, but does not include your credit score.
You may be entitled to more than one free credit report during a 12-month period under certain circumstances.
For instance, if you receive a notice that you were denied insurance or credit because of something on your credit report, or if you believe information on your report may be inaccurate due to fraud.
It may seem redundant to collect a report from each agency, but it’s not. Scores and reports can vary wildly from one agency to the next, so while one could be entirely accurate, another could be riddled with inaccuracies.
(You can order all three reports at AnnualCreditReport.com.)
Luckily, credit scores are becoming increasingly easier to check for free as well. There are a few different options.
Credit-monitoring sites such CreditKarma, Quizzle, and Credit Sesame will allow you to access your credit score free when you provide a few pieces of information up front.
The score they offer may vary from one site to the next (remember, there are several different scoring models and different agencies may have different information), but they do give you a better idea of where you currently stand.
They can also send an alert if a change in your score is detected.
Many credit card companies have stepped up to the plate and started giving both customers and non-customers free, easy access to their credit score.
American Express, Bank of America, and Barclaycard give cardholders their FICO score.
Capital One allows anyone access to their Vantage 3.0 score (customers and non-customers), and Discover allows anyone access to their FICO score.
Chase, Citi, and Wells Fargo allow customers with certain accounts to have access to their FICO score, as well.
Check with your financial service providers to see if you already have the ability to check your score.
What To Look For in Your Credit Report
Now that you know how to access your credit report and what information you will find there, it’s important to have an idea of what you should be looking for.
Accuracy of personal information
Check to make sure your name is spelled correctly, and your address and Social Security number are accurate.
While variations could be simple mistakes that are easy to rectify, they could also be an indication of fraud, or that someone else’s information was combined with yours.
Next, take a careful look at the information listed for each of your credit or loan accounts.
Make sure the credit limits and loan amounts accurate, as well as the payment history reported for each account.
There’s always a chance the lender or creditor reported this information to the credit reporting bureau inaccurately.
And if you see an account you didn’t open, or activity on an account that should be inactive, that could be an identity theft red flag.
Collections and other negative information
See if there are collections accounts you aren’t aware of -- whether it’s an account you don’t believe you opened or one you didn’t know was delinquent.
If there are any judgments, liens, or bankruptcies, make sure you were aware of them and the information is accurate. There’s a chance a collector didn’t notify you properly or, again, that your identity has been stolen.
Make sure all of the “hard” credit inquiries, those reportedly made on your behalf, are from parties you recognize. If they aren’t, that could be an indicator of someone trying to get credit in your name.
How to Dispute Inaccurate Information
If you do happen to see inaccurate information on your credit report, there are a few different ways to dispute it.
Speak with the lender or creditor that reported the information
The company responsible for reporting the information is required to investigate any dispute you bring to their attention. There’s a chance they could recognize the inaccuracy and contact the credit reporting agencies on your behalf.
File online with the credit reporting agency (or agencies)
If you see a small error, you may want to just file a dispute online with each of the credit reporting agencies. They each accept these disputes on their websites.
Make a dispute with a written letter
For larger errors, you probably want to go the extra mile and write a letter to the credit reporting agencies.
This ensures your right to arbitration is protected (unlike with online disputes). In other words, you still have the right to sue if the mistakes aren’t corrected.
Do you have documentation supporting your claim that certain information is incorrect? Make sure to include it. Every little bit can help.
Regardless of how you go about handling a dispute, make sure to keep organized documentation of the steps you are taking, who you have spoken to, the date you had the conversation, what they have promised, and what happened as a result.
If someone says the inaccurate information will be cleared, follow up to make sure it actually happened.
Don’t wait to uncover an account sent to collections or a dismally low credit score when a third party checks your credit on your behalf.
Even periodic checks of your credit report and score can ensure you won’t be denied for a loan, job, insurance, or credit account at a time you need it most.
Mistakes can take time to fix, so there’s no time like the present to order your credit report and go through it with a fine-toothed comb.