If you are applying for a loan or credit, records of your previous dealings with someone else’s money are vital.
Whether you get that mortgage or credit card, or not, may depend on a network of credit reporting agencies that either share information with, or are owned by, three major credit bureaus. This report is often a critical factor in credit scoring systems that lenders use to issue credit cards as well as mortgages or other loans.
So, if you’re considering making a major financial move it’s a good idea to check your credit report to know where you stand. That way you can be aware of, and if necessary take care of, problems before they jump up and derail your plans.
If you find problems, or if potential creditors discover them, take steps to rebuild damaged credit and clean up that record.
If you’ve made mistakes in paying previous loans, bounced checks, made late payments or had other problems, you may still be able to reduce the amount of damage they will do to your credit with explanations or some basic repair.
Getting your hands on your credit report
Obtaining copies of your credit reports is easy.
You can request a copy from each of the three major national credit bureaus:
Equifax, Experian and TransUnion. Checking your credit can cost you as much as $9 per report, although it differs from state to state.
If you applied for a loan and were turned down, you are entitled to a free copy of your credit report, but you must request a copy by writing the correct credit bureau within 30 days of the rejection. With your request, you should include a copy of the declined loan application.
You can also get a free report if you are unemployed, planning to apply for jobs in the next 60 days, receiving public welfare assistance or believe the credit file contains mistakes resulting from fraud.
To obtain a copy of your credit report, call the number of the proper credit bureau and follow their directions, or order it online. If you write, you will need to include your full name, date of birth, current and former address, Social Security number, your spouse’s name and your phone number. Each person requesting the report should sign the request.
Time it, then check the details
If you are about to apply for a major loan, such as a house or car, it’s important to give yourself time to correct mistakes or make good on delinquent accounts. Depending on the type of loan, you should give your self enough time. Here’s a guideline:
- For a home, you should check your credit at least three to six months before you apply for a mortgage.
- For an auto loan, check your credit (and arrange financing with your bank or credit union) before you start shopping.
- For credit cards, check your report before you apply. The last thing you need is for a credit report problem to slow down your application — particularly if it’s not your fault.
Once you get the report, you should make sure the following information is correct:
- Your name, or names if you are or were married
- Social security number
- Date of birth
- Addresses of places you’ve lived
- Names of places you’ve worked
- Pending accounts and accounts that have been closed
- Nothing has been on the report longer than is allowed by law:
- Bankruptcies must be taken off your credit history after 10 years.
- Suits and judgments, arrest records, and most other kinds of unfavorable information must be dropped after seven years. Tax liens must be dropped seven years after the lien is paid in full.
Records of delinquent payments or other problems (i.e., make sure they aren’t mistakes)
Any error that you find must be investigated by the credit bureau with the creditor who supplied the data. The bureau will remove from your credit report any errors a creditor admits are there. If you disagree with the findings, you can file a short statement in your record giving your side of the story. Future reports to creditors must include this statement or a summary of it.
The Fair Credit Billing Act requires creditors to correct errors promptly and without damage to your credit rating. The law defines a billing error as any charge:
— for something you didn’t buy or for a purchase made by someone not authorized to use your account;
— for something that is not properly identified on your bill or is for an amount different from the actual purchase price or was entered on a date different from the purchase date;
— for something that you did not accept on delivery or that was not delivered according to agreement.
Billing errors also include:
— errors in arithmetic;
— failure to show a payment or other credit to your account;
— failure to mail the bill to your current address, if you told the creditor about an address change at least 20 days before the end of the billing period;
— questionable items, or any item for which you need more information.
Once you have written about a possible error, a creditor must not give out information to other creditors or credit bureaus that would hurt your credit reputation until the matter is resolved. And, until your complaint is answered, the creditor also may not take any action to collect the disputed amount.
The law is on your side
Keep in mind, the law is on your side if information on your credit report is proven to be false but is not removed, according to the
Fair Credit Reporting Act. Under the law, you are entitled to actual damages, plus punitive damages that the court may allow if the violation is proved to have been intentional. In any successful lawsuit, you will also be awarded court costs and attorney’s fees.
You may also sue any credit-reporting agency or creditor for breaking the rules about who may see your credit records or for not correcting errors in your file.
A person who obtains a credit report without proper authorization — or an employee of a credit reporting agency who gives a credit report to unauthorized persons — may be fined up to $5,000 or imprisoned for one year, or both.
But a lot of people can see that report – including everyone to whom you have applied for a loan or credit. So be careful when applying for credit.
When the companies you apply to check your report they can find out who else has been checking your report and determine what, when and how you have been applying for credit. That means if you have been getting turned down and are desperately applying for credit all over town your potential creditors will know.