Filed under: Personal Finance, Credit Report, Credit Card, Lynnette Khalfani-Cox
Also, because your FICO credit score is based on the information in your credit report, you want those credit files to be absolutely correct.
So how do you get started? Begin by obtaining your three credit reports -- from Equifax, Experian and TransUnion. You can get them free of charge at AnnualCreditReport.com. If you haven't peeked at your credit score lately, read this article on how to get your FICO credit score free too.
Once you have your credit reports, you'll see that all of them contain basic information that can be categorized into five primary sections:
- 1. Personal Information
- 2. Summary of Accounts
- 3. Public Records
- 4. Inquiries
- 5. Consumer Statements
Summary of Your Credit Accounts: The Good, The Bad, and The Ugly
The meat of your credit report will be a detailed listing of the opened and closed accounts that creditors have reported about you. In this section, you can find the following types of accounts (again, including current accounts or those you've had in the past):
-mortgages
- -home equity loans/lines of credit
- -credit card accounts
- -charge cards
- -department store or retail accounts
- -personal lines of credit
- -student loans
- -auto loans
- -medical-related debt
- -personal loans/notes
- -other accounts
Each account will be identified by an account name - meaning, the creditor you owe - and an account number. The first few digits or the last few digits of your account numbers are frequently omitted, to guard your privacy. (Some credit reports even scramble account numbers.) So don't worry about the account numbers too much at this phase, unless the account number, or the account itself, is totally unrecognizable to you.
What To Look For First In Your Summary of Accounts: Your Payment Status
For now, the most important information in this section of your credit reports are the "Status" references to whether you've paid your debts on time, or whether you've been late - and if so, how late. So this is where you should start as you delve into your account summaries.
Your payment history is shown on your credit reports as your "Account Status," "Current Status," "Pay Status" or just simply "Status."
Open accounts with no delinquencies will have these types of "Status" comments: "Pays as Agreed," "Never Late," or "Current." Closed accounts with a positive credit history will be noted as "Paid As Agreed," or "Pays As Agrees."
Negative information will most commonly be stated as 30, 60, 90 or 120-day late payments. Other negative comments include: "Collections," "Settled," or references such as "Paid, Was 60 Days Late."
If an account has been "charged off" or written off by a creditor as uncollectable, that fact will be noted too, typically along with the dollar amount charged off. In short, any notation in your credit file that indicates that you did not pay your debts exactly as originally agreed will be viewed negatively by credit-scoring firms, and potential lenders.
The Dollar Balances Shown On Your Credit Reports
Other key data to examine pertains to the dollar amounts shown on each of your credit accounts. For each account, you should see summaries of the following:
- -Credit Limit/Original Amount: This number should reflect the amount of credit you were granted when the account was first opened.
- -High Balance: This figure should show the highest amount of credit you've ever used for each account.
- -Balance or Recent Balance: This dollar amount will indicate the last balance owed on this account, as reported by your credit grantor. Frequently, this information can be a month or so old. It depends on when you made your last payment, when your creditor reported an up-to-date balance to the credit bureaus, and when your credit report was actually pulled.
- -Recent Payment: This figure shows the most recent dollar amount that you paid on the account, as reported by a creditor.
- -Monthly Payment: For mortgage debt or installment loans, this number should show your normally scheduled payment amount. For revolving debt (i.e. credit cards), it will indicate your minimum payment due.
6 Credit Report Mistakes You Should Dispute With Your Creditors
Now that you've evaluated these sections of your credit reports, you're ready to dispute mistakes.
When you see erroneous payment or status information in your credit file, you should take up that dispute with your creditor, before contacting the credit bureaus. By going to the creditor first, and not the credit bureau, you reduce the risk of the information being temporarily deleted, and then later re-inserted into your credit files.
Examples of the types of erroneous information you should dispute with a creditor include:
- -Wrongfully reported late payments: Maybe a creditor reported you as being 30 days past due, but you weren't. Or perhaps the severity of your delinquency has been over-stated, as would be the case if you were 60 days late paying a bill, but a creditor reported your 90 days late.
- -Collection accounts: If an account in collections contains inaccurate information, contact the creditor to clear up the matter. They may have added additional fees, interest charges or penalties, which caused the outstanding balance to grow enormously. Or perhaps you didn't even realize you had an account in collections, due to diverted mail or an address change. Whatever the circumstance, if there is a reason for you to dispute collection-account information, you'll be best served starting with the creditor.
- -Inaccurately noted account status: Contact any creditors that have mistakenly reported your account status to the credit bureaus. Your account status includes whether your account is open or closed, current or past due, charged off or not, and so on.
- -Account ownership mistakes: Are there accounts on your credit report showing up as joint obligations, but they're really just debts of your spouse or someone else? Or what about an account in which you're listed as an "authorized user" but you're actually a co-signer and joint user on the account? In each of these cases, you should contact the creditor and ask them to amend or update the account ownership information shown on your credit report.
- -Negative, erroneous information about your account status: Any negative payment information or comments about your account that are erroneous should be deleted from your credit reports. For instance, if your credit report shows "Account Closed By Credit Grantor," but in reality, you closed the account, ask the creditor to change it to "Account Closed By Consumer." This won't impact your credit scores, but you want the information to be reported accurately nevertheless. Another example: if a creditor has reported inaccurate information about your past credit usage, which would be shown in the "high balance" field of your credit report, request that this information be properly reported as well.
- -Inaccurate "balance" information: Since your creditors report your balances to the credit bureaus every month, it's not uncommon to find that there is some lag time between the time that you pay your bills, and the time that your creditors get around to notifying TransUnion, Experian and Equifax about those payments. So don't be concerned if your "balance" shows $2,200 but you know you made a payment two weeks ago of $200 and your correct balance is really $2,000. What you should watch out for however, are major discrepancies in your reported balances. For instance, if your balance was reported as $2,200, but it was really $220, then that is something you should contact a creditor about, asking them to correct their records and your credit reports.
For all of the errors mentioned above, and especially for disputes about payments (i.e. how much you paid, the account status, whether or not a payment was late and so on), always start out by going directly to your creditor and requesting that they delete outdated information or update negative, inaccurate information contained in your credit report.
If a creditor doesn't respond favorably, you'll need to get more aggressive in your efforts, elevating your requests to supervisors, drafting formal letters and supplying creditors with any documentation you have that supports your claims.
For more tips on managing credit and debt wisely, visit my free financial advice blog, AskTheMoneyCoach.com. Also, for specific tips to improve your credit rating, check out my new book, 'Perfect Credit: 7 Steps to a Great Credit Rating.'
Lynnette Khalfani-Cox, an award-winning financial news journalist and former Wall Street Journal reporter for CNBC, has been featured in the Washington Post, USA Today, and the New York Times, as well as magazines ranging from Essence and Redbook to Black Enterprise and Smart Money. Check out her New York Times best seller 'Zero Debt: The Ultimate Guide to Financial Freedom.'