Where to find your credit report
Federal law entitles you to a free copy of your credit report once every 12 months from the three major credit-reporting agencies: Equifax, Experian and TransUnion. You can get a free copy of all three bureaus' versions of your credit report at AnnualCreditReport.com.
To check your credit report every few months, order one at a time and space them out over the course of the year. If you're getting acquainted with your credit history for the first time, order all three at once.
If you're turned down for a job or credit, or you don't get the best rate available, you also have a legal right to see your credit report at no charge. The paperwork you get notifying you of the decision will include a number for you to call.
Start with your identification basics
The most important part of your credit report is your identifying information: your name, current address and Social Security number, says Natalie Lohrenz, director of counseling at the Consumer Credit Counseling Service of Orange County.
"People obsess over tiny fluctuations in their credit score, but what they should focus on is the question, 'Is it accurate?'" she says.
Small discrepancies, such as an account that has your nickname listed instead of your given name, don't impact your score. But if there's a more serious discrepancy, such as an incorrect Social Security number, you'll want to get it straightened out, says Maxine Sweet, recently retired vice president of public education at Experian.
After checking all of the identifying information, look at the accounts and make sure they're all yours. Keep in mind that some lenders, such as the financing companies that issue many store-brand credit cards and companies that handle medical billing, might have a different name than the one on the storefront or hospital.
Scan your report for discrepancies
"Be alert for accounts that you don't recognize and check with the credit bureau to see what's going on," says Anthony Sprauve, former senior consumer credit specialist with FICO. "Verify that any negative information associated with any account belongs to you. It is possible that someone else's account is included in your report by mistake."
Sprauve says another red flag can be an account with a much higher balance than you carry. Since any of these items could indicate a case of mistaken identity or identity theft, these are issues to address right away.
Jessica Cecere, who retired from credit counseling organization CredAbility (now ClearPoint Credit Counseling Solutions) in 2012, says one common -- and more benign -- credit report error she encounters is the inclusion of old negative information that should have come off the person's record. Most negative information stays on for seven years, and Chapter 7 bankruptcies remain for 10.
Watch out for phantom money
Lohrenz says consumers with a history of collections in their past can have their outstanding balances appear larger than they actually are because of the booming secondary market for collections. Here's how it happens: If a consumer has a credit card balance that becomes delinquent, the issuer will attempt to collect for a while, then give up and sell the account to a collection agency.
The card balance should then drop to zero, and a new account, this time with the collection agency, will appear on the report. Sometimes, though, the issuer won't strike that balance from their records, so it will appear as if the consumer has two outstanding debts. If the debt is bought and sold numerous times, which is common, the problem can multiply.
Another instance of phantom money can occur when a consumer has a closed bank account that has an overdraft protection line of credit tied to it. In some instances, that line of credit will remain on a person's report even after the account is shuttered, says Bucci.
How to dispute a mistake
If you find a major mistake, order your credit report from all three bureaus to determine whether the problem is limited to just one report. The next thing to determine is whether you need to take up your dispute with the credit-reporting bureau or the lender.
If there's a case of mistaken identity, such as someone else's information on your report, or accounts listed that aren't familiar to you, contact the bureau. All three bureaus have online dispute forms, which Sweet says is a faster method of resolution than snail mail.
"Taking things up with the bureau is easier because they have one set process," says Bucci. "There's a dispute process in place so you can dispute any account with the same process, whereas when you contact the creditor, every one's a little different. It's not as neat and simple."
In the case of negative information more than 7 years old or a report of an outstanding balance that has actually been paid off, try contacting the lender directly.
It would be great if you could just file a dispute and forget about it, but you may have to follow up. Especially if an item is very old, the creditor in question may have been bought, merged or gone out of business entirely, which makes documenting everything important.
Keep notes of the people you speak with at the bureau or lender, when you contacted them and the date by which any corrective action will be taken. Check your credit report again after that date to make sure they followed through. The three credit bureaus "talk" to each other electronically, so a correction made on one report should be reflected on the other versions, too.
What not to sweat
There are a couple of items pertaining to your credit report that might seem alarming but really aren't a big deal. Closed accounts in good standing don't need to be taken off your report. In fact, leaving them on your report can help.
Credit inquiries also aren't as damaging as many people believe, says Sweet. "Honestly, a hard inquiry is very small impact on your credit score, and it's short term. It stays on for two years, but it has the most impact only within six months."
A hard inquiry will appear if you applied for a loan or credit card. It can also crop up if you enter into a service contract such as a cellphone or cable TV plan.