What's Lurking in Your Credit Report?

(PHOTO: Casper1774 Studio/Shutterstock)
By Oliver Jones

Even the most experienced money manager can be surprised by what’s hiding in his or her credit report.

Take Brad Wright, a certified financial planner at the New England Financial Planning Group.

“A few years back while going through a home mortgage re-fi, my mortgage broker called and said I owed thousands of dollars to a credit card company. It turned out to be another Brad Wright with a different Social Security number that somehow got attached to my report,” he explained. “The mortgage broker was able to simply send a letter on my behalf to rectify the situation. But had my report not been checked, it could have adversely affected my credit for years.”   

What can you do about hidden errors? Wright has some simple suggestions.

Set a date. Wright and other personal finance experts recommend setting a date in your calendar for one year after the last time you checked your credit report—unless, of course, you are planning a major purchase, in which case you should check right away.

(You are able to check each of your three credit reports once a year at no cost. Go to AnnualCreditReport.com)

Check it twice. You can’t know what kind of erroneous information might be damaging your credit until you check.

“Wrong account numbers, loans that have been paid off but still show as open, fraudulent accounts—these sorts of mistakes are becoming more and more common, especially as online identity theft enables someone to open an account in your name,” said Wright. Also, when you find discrepancies, he said, don’t dawdle. "Address it right away.”

Break out the postage stamps. While speed is important, creating a paper trail is a crucial part of addressing and fixing any errors in your credit report. That is why good old-fashioned snail mail can often be the best course of action. 

“You will want to contact the credit reporting agency in writing with what you think is inaccurate, include copies of any related documents,” said Wright. “Requesting a return receipt via U.S. Mail is always a good idea. It is your proof that your letter and documents were received." 

Your paper trail shouldn’t end there. "Keep detailed notes with names, dates and times of anyone you speak with,” said Wright. 

Freeze. To keep things from getting worse before they get better, you may want to call in security. “In the case of a fraudulent account opening you can place a security freeze on your credit reports,” said Wright. “This means you or anyone pretending to be you won’t be able to open any new lines of credit for as long as the freeze is on your account.”

Don’t forget the basics. Hopefully, any issues you might uncover the next time you check your credit will be erroneous ones, rather than an oversight or self-inflicted wound. Common self-inflicted wounds include missed payments and capriciously opening and closing credit accounts.

Other considerations include payment history, amounts owed, length of credit history, new credit and type of credit.

“Credit influences everything from the interest rate you get on loans and your insurance rate to whether a landlord will approve you for a lease,” noted Wright. “Some employers will now check your credit score before hiring you. Simply put, your credit affects too much of your life to not pay attention to it.”

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