A negative credit history can have serious repercussions. Lenders may refuse to extend credit, but a bad credit report can also cause landlords to deny potential tenants and employers to reject applicants. The credit score can also be used to determine the interest rate charged on credit cards, auto loans and mortgages. Insurance companies can use a credit history to decide the rate to charge as well as whether to issue a policy at all. Consumers are discovering that it is increasingly important to protect their credit histories and repair their credit reports whenever possible. The following steps can help anyone who needs to repair his or her credit as well as those who want to protect their credit histories.
Obtain Copies of Credit Reports
By law, the three primary credit bureaus (Experian, TransUnion and Equifax) are required to provide a free copy of a consumer’s credit report annually upon request. They are also required to furnish a free credit report if their report is the basis for an adverse action, such as the denial of credit, housing or employment. Under certain conditions, the bureau may also be required to furnish another credit report even if the individual has already obtained a free copy that year. Those who receive welfare benefits, are unemployed and planning to look for employment within 60 days, have been the victim of identity theft or have had inaccuracies corrected typically qualify for a second report at no charge.
Consumers can request their annual reports by calling 1-877-322-8228 or visiting www.annualcreditreport.com. Reports from all three bureaus can be requested at one time, or consumers can stagger their requests to obtain a free copy from one bureau at a time, allowing them to check their credit every few months. Because each bureau can receive information from different sources, it is best to obtain copies from each, whether requested all at once or individually.
Review Credit Reports Carefully
Studies have shown that inaccuracies exist on between two and five percent of all credit reports. Perhaps a bill was reported by the creditor as unpaid when it was actually paid, or a late payment was reported when the bill was paid on time. The consumer may have also been the victim of fraudulent activities or identity theft. It is critical to identify any entries that are not accurate and legitimate.
Report Inaccuracies Immediately
There is no legal method of removing legitimate, accurate entries on a credit report. However, credit bureaus are required to investigate reports from consumers that inaccuracies exist or that entries are the result of fraudulent activity. Requests should be made in writing and include any supporting documentation disproving the charge, such as a copy of a cancelled check showing that the creditor received payment. Some people include a copy of their credit report with a circle around the questionable entries. Under most circumstances, the bureau must investigate and respond within 60 days.
Use Credit Judiciously
Negative entries can remain on a credit report for up to seven years, and bankruptcies can remain for 10 years. The best way to protect a credit history is to pay all bills on time. However, creditors may also look for other indications that an applicant might pose a potential risk. Creditors will also look at the balances on credit cards, the approved limit on each card and how long the individual has had each card. Applying for too many credit cards or loans in a brief period can also trigger red flags for a creditor.
A credit history has become an important aspect of everyday life, whether the goal is to rent an apartment or purchase automobile insurance. Every consumer should be proactive in protecting his or her credit.