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Financial Feasts

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Cleaning Up Your Credit

A good credit rating is invaluable. It will help you get more credit and open up financing options. But if over the years, you've got yourself in a credit stew, don't give up, because it's possible to rebuild a good credit history. It may take a while, and you may find yourself on a credit diet, but if you've got the willpower, you can do it.

One of the best ways to keep yourself out of credit trouble is to be your own most rabid critic by monitoring your own credit report for damaging information. Get a professional credit report done every year and before any major purchase. This gives you the opportunity to see yourself the way lenders, insurance companies and other businesses do. And it gives you a chance to correct any false or damaging information before it hampers your ability to get financing. Finally, it can spur you to take the hard steps required to clean up your credit.

1. What's In A Credit Report?

2. How To Get A Copy of Your Credit Report.

3. Disputing A Credit Report.

4. Tips On Cleaning Up Your Credit.

5. Web Links.

6. Resources.

1. What's In A Credit Report?

A credit report includes detailed (and sometimes almost indecipherable) information on whether you pay your bills on time, who has granted you credit, and what credit you have applied for, even if you've been turned down. Every credit card you've ever had, including some you've forgotten, will be listed and evaluated. So will your history of repaying bank loans, utility bills, and the government.

For every credit account, the report lists:

  • Date account was opened
  • Scheduled monthly payment amount
  • Estimated actual monthly payment amount
  • Date last payment was made
  • Terms of the account--interest rate, etc.
  • Original loan amount, credit limit, historical high balance
  • Balance owed, balance date, and amount past due, if any
  • Payment history for the last 24 months

Even minor infractions like a missed payment or a payment over 30 days late, stays on your credit report for seven years. Bankruptcy hangs around for 10.

Bankruptcy filings, student loan defaults, liens and legal judgments against you are also included. Your financial statements and financing sources, if you have released them, may be reported as well. Credit inquiries from companies that have checked on your credit are also listed. This can give potential lenders an idea of how much credit you have sought unsuccessfully.

2. How To Get A Copy of Your Credit Report

Since lenders use different, and sometimes multiple, credit agencies, it pays to get a report from all of them. If you have recently been denied credit, the report is free if you order within 60 days.

For business credit reports:

Dun & Bradstreet
Business Information Reports
99 Church Street
New York, NY 10007
800-TRY-1DNB

Experian
The Credit Bureau, Inc.
P.O. Box 596
Pittsburgh, PA 15230

Toll Free (1-888-397-3742)
Or visit their web site at: Experian

Experian (formerly TRW) charges $8.00. You can order online for $19.95 from the Microsoft Network or ATT Network.

Equifax Information Services Center
P.O. Box 105873
Atlanta, GA 30348

Toll Free (1-800-440-5059)
Or visit their web site at: Equifax

Trans Union Corporation
Consumer Relations
1561 E. Orangethorpe Ave.
Fullerton, CA 92831

Toll Free (1-800-916-8800)
Or visit their web site at: Trans Union Corp.

3. How to Dispute A Credit Report

You've discovered a glaring error: Who is this XYZ Company who claims you owe them $200,000? Must be that mix-up with your cousin with the same name. Thanks to the Fair Credit Reporting Act, the credit agency is required to correct all errors and send a notice of correction to anyone who has requested your report in the last six months. But you've got to ask.

What to do:

Report any incorrect information to the credit reporting agency immediately. They are required to investigate disputed information within a reasonable period of time.

If the dispute is not resolved to your liking, you're allowed to file a statement of up to 100 words explaining your position, which will be included each time your report is requested.

If a credit report notes you made late payments on accounts that are no longer delinquent, it must also reflect that your payments are now up-to-date. The same goes for a fraudulent charge that appears, unpaid, on your report.

If you're confused by your credit report--and it can be a confusing document--make an appointment with the credit reporting agency to have someone explain what it all means.

4. Tips on Cleaning Up Your Credit

Starting now, pay all your bills promptly, making at least the minimum payment. It takes time to reverse years of bad credit, but eventually your new prompt pattern will overtake your past record.

Stop using your credit cards! Work to pay off the total balance of existing accounts so you don't look like you have high monthly payments.

If you don't need the "safety net" of having many credit cards, cancel some of your cards. Sometimes your total credit limit is considered in granting you new credit and your unused credit lines may count against you as your total credit exposure/obligations.

Consider consolidation loans to get credit off high interest credit cards onto lower-interest cards or loans.

If you missed or were late with a payment to a creditor some time ago, but you're up to date now, ask them to remove the blemish to your credit rating with a note to the reporting agencies.

Make sure all the information on your credit reports are accurate.

If you can't get credit or you constantly misuse credit, switch to secured credit cards. Because secured cards are linked to your bank savings account, you can only withdraw up to the amount in your account.

Recruit co-signers for loans. Make sure your co-signer understands he or she is fully responsible for the loan if you default. Then don't.

Avoid "credit repair" companies that promise quick, easy mending of your credit rating -- there's no such thing.

Defer as many big purchases as possible until you've cleaned up your credit.

Weed out clients who are slow payers or poor credit risks. While you're giving them a break, they're hampering your efforts to pay your own bills on time.

If you are in a slow-paying industry, where payment often takes over 90 days, consider selling your receivables to a factor to avoid more late payments.

5. Web Links

Dun & Bradstreet Inc. Information on D&B's products and services, along with some business how-to's. Order business backgrounders on-line for $20.

Experian (Formerly TRW) information on Experian and its business information services.

Site of Debt Counselors of America, A non-profit group that assists individuals and families trying to clean up their debt.

Bank Rate Monitor's site. Lots of frequently updated information on which banks and credit card companies are offering the best rates. Also breaks information down by city, and offers advice on cleaning up your credit and how to choose the right credit card.

6. Resources

For business credit reports:

Dun & Bradstreet
Business Information Reports
99 Church Street
New York, NY 10007
800-TRY-1DNB

Experian
The Credit Bureau, Inc.
P.O. Box 596
Pittsburgh, PA 15230

Toll Free (1-888-397-3742)
Or visit their web site at: Experian

Experian (formerly TRW) charges $8.00. You can order online for $19.95 from the Microsoft Network or ATT Network.

Equifax Information Services Center
P.O. Box 105873
Atlanta, GA 30348
Toll Free (1-800-440-5059)
Or visit their web site at: Equifax

Trans Union Corporation
Consumer Relations
1561 E. Orangethorpe Ave.
Fullerton, CA 92831
Toll Free (1-800-916-8800)
Or visit their web site at: Trans Union Corp.

For credit information:
National Association of Credit Management
8815 Centre Park, Suite 200
Columbia, MD 21045
410-740-5560

For Debtors Anonymous meetings in your area:
Debtors Anonymous
General Services Board
P.O. Box 20322
New York, NY 10025

 

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