Improving your Credit Report

Know your credit score: Improve your rating

Credit abuse is an American past-time that reflects the general lack of interest in working toward a good personal credit score, this can result in interest rates that are so high, that consumers can barely afford to pay the monthly interest.

However, steps can be taken to increase one’s credit score, maintain a good score and correct inaccuracies.

Explaining and obtaining your credit report

A credit report contains information on where a person lives, how bills are paid, arrest history, bankruptcy and legal judgments. Consumer reporting agencies sell this information to creditors, insurers, employers (only with your consent) and businesses that provide credit, insurance, employment or rental history. It is compiled using a formula based on the amount of debt, type of debt, payment history, account longevity and other things that rate the risk of lending someone money.

Late payments, corrections, judgments and carrying a high credit card balance can lower credit ratings. Lenders than consider the applicant a high-risk, resulting in higher interest rates than someone with a good credit score.

U.S. consumers have the right to obtain a free yearly copy of their credit report from each of the nationwide credit reporting companies (Equifax, Experian, Trans Union), according to the Fair Credit Reporting Act. A copy of each report can be requested at The Federal Trade Commission enforces the FCRA and warns about imposter websites that promise “free reports.” The free annual credit report program has only one authorized site. Also, and nationwide consumer reporting agencies will not send an e-mail asking for personal information. Such requests are most likely scams.

It is important to note that the annual free credit report does not report the actual credit score, but it can be purchased through the annual credit report website or through one of the consumer reporting agencies.

The main thing is to make sure the accounts that are reporting are accurate and any late payments or derogatory findings are accurate as well, said Robert Bancroft, wealth advisor for Morgan Stanley. Also, make sure there are no duplicates.

“Consumers should look for accounts or creditors that they don’t recognize and confirm the credit lines and repayment reports,” said Ben Woolsey, Director of Marketing for

Credit scores can range from a low off 400 to a high of 900. Mortgage lenders use the “mid-score” of the three credit reporting bureaus to determine credit level. 720 and above is a good credit score, said mortgage and financial consultant, Kevan Austin. “With a 679 and below, there is usually something going on to bring your credit score down.”

Working toward positive credit history

Austin advises that distributing debt to a balance that is below 50% of the credit limit on all cards, will improve one’s credit score. “When the balance is up near your credit limit, it looks like you are in trouble to another lender and to the reporting bureaus.”

“No credit” can sometimes have the same result as “bad credit.” It depends on the type of loan. First time homebuyers can sometimes work with the Federal Housing Administration to obtain a home loan, car dealers are sometimes willing to take higher risks and jewelry businesses will lend to people with no credit because the markup is generally so high. But in most cases people without a credit history do not show lenders a history of well-managed money.

Austin advises that students trying to establish a history of credit can buy some jewelry at a chain store on credit or have their parents add the student’s name and social security number to their credit card. Use and on-time payments will help establish a history of credit for the student.

The FTC reminds women that a good credit history often is necessary to get credit, this includes a record of past bill payment. Many married, separated, divorced, and widowed women don’t have credit histories in their own names because they lost their credit histories when they married and changed names or creditors reported accounts shared by married couples in the husband’s name only. The FTC advises that a woman should “make sure all relevant information is in a file under your own name”.

Monitoring credit

Some experts state that it is better to stagger the yearly free ratings for each credit bureau, receiving one from a different bureau every four months. Other say it is important to compare all three reports. Since some lenders don’t report to all three bureaus, different scores can be generated from each. “In my experience, over 50% of the credit reports I review are incorrect and need some correcting,” said Austin.
There are many credit monitoring services provided through credit reporting agencies and banks, in which you may receive a letter automatically each quarter detailing changes that have been made to your credit file or notifications of change to your account.

Repairing credit

Under the FCRA, there is a process that must be followed when disputing a claim. Let the credit-reporting agency know that you are disputing the claim. Write to the CRA and provide any supporting documents. Once the agency has investigated, it will send you a written notice with a free credit report.

Inaccurate information will be removed (the information provider may not report it again) and negative information will remain on the credit history for seven years, with a few exceptions. A criminal conviction has no time limit. Bankruptcy effects credit for 10 years and unpaid judgments can last for seven years or when the statute of limitations expires. There is no time limit on the information that reports an application for a job of $75,000 or more. A credit or life insurance application of more than $150,000 is also reported without a time restriction.

Time is the only thing that will correct the adverse effects of late payments. The older the late payment or collection is, the less important it becomes to the score. When closing an account, ask that it be listed as “closed at the request of the consumer.” However, the longer an account is kept open, active and below 50%, the better it looks to a lender.

If a credit application is declined, the Equal Credit Opportunity Act requires creditors to specify why credit was denied. It is important to find out specific reasons, such as short credit history, and to ensure this information is accurate. Watch for signs of identity theft such as credit cards under your name without your knowledge.

When declined credit, employment or insurance, applicants are also entitled to a free copy of their credit report from the agency that reported the negative information, within 60 days of receiving notice. Other situations that entitle one to a free credit report include: being unemployed with plans to look for a job within 60 days, being on welfare, or inaccuracy on the report due to fraud.

If inaccurate credit history cannot be resolved, Woolsey suggests that there are “fee-based credit repair services, which can be less expensive than hiring an attorney.” Consumers can also contact the Consumer Counseling Credit Counseling Service, a non-profit community service agency.