Putting card payments on automatic can hurt your credit
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com
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Dear To Her Credit,
I'm retired and travel overseas continuously. My bank pays
my bills online. In April 2011, my bank sent a payment to the credit card
company, but the post office returned it to me. I was out of the country. Then began my monthly, no-payment letters, and then monthly late
fees, and then blocking the credit card. After many calls to the bank, finally
a VP agreed to remove the late fees, so that's taken care of.
The problem now is that my credit score has plummeted. It
was in the 700s in January 2011. I got a letter after being denied a credit
request saying my score was in the 100s. What can I do, if anything? -- Sarah
Your story illustrates one problem with putting our
financial lives on autopilot. Not long ago, we wrote checks to each of our
creditors. If we didn't get a bill, we probably noticed. Now, we set things up
electronically and assume it's all taken care of -- and it may be, for months
or years. Until, for one reason or another, something goes wrong!
While I'm not advocating that we go back to check writing and snail mail, paying bills online still requires that you check your statements every month -- ditigally or on paper -- to keep track of your balances and payments, not to mention possible fraudulent use of your credit. Too many things can go wrong without some oversight on your part: due dates or minimum payment amounts may change, payments may not go through, interest rates may rise or your account can get hacked.
Something's fishy about being told your credit score is in
the 100s, however. A FICO score under 600 is very low. A score in the 300s is
almost impossibly low. Either they are using a different scoring system, or
they are in error.
By calling the bank and having the late fees removed, you've
done the hardest work fixing the problem. Now you just need to take it one step
further and clean up your credit report.
Your first step is to find out exactly what is on those
credit reports. The company that denied you credit must tell you which
reporting bureau gave you information. If you request a report within 60 days
of being turned down for credit, you are entitled to get it for free. I would
also encourage you to pull your actual FICO score from myFICO.com, which costs about
You can also get a free annual credit report from each of
the three reporting bureaus by going to AnnualCreditReport.com. You can fill
out the form online or call 877-322-8228. Do not contact the three nationwide
consumer reporting companies individually, and do not go to any other
"free" credit reporting website that asks for your credit card number.
The three reporting companies only provide free annual credit reports through this
Annual Credit Report Request Service.
You can ask for reports from all three companies or from
only one at a time. By getting only one report at a time, you could feasibly check
your report every four months for free. However, because you've had a problem, I'd
ask for reports from all three companies. They may not have exactly the same
information. In fact, you may be surprised at everything on your reports after you
have problems with both mail and with
online bill paying.
If you request your credit report online, you should be able
to see the results immediately.
Next, make sure the credit bureaus report your corrected
information. Just because you've had late fees removed, don't assume your
reports are taken care of. Jeanne Brutman, a New York City financial planner,
says, "She needs to submit a letter from her bank, stating their error and
how they withdrew all the late charges for their bank error."
Send the letters to the three credit bureaus at:
Equifax, P.O. Box 740241, Atlanta, GA
Experian , P.O. Box 2002, Allen, TX 75013; 888397-3742
TransUnion, P.O. Box 1000, Chester, PA 19022; 800-916-8800
Repeat the process for other negative marks on your report.
"This also needs to be done to every company that did not receive payments
on time and reported her. She will need their letters as well, to send to the
credit reports to correct the reports." Remember, however, only inaccurate
information can be corrected on your credit report. Instances where your bank
forgave you late payments or fees can be fixed, but if the lender refuses to
forgive you for a late payment, for example, that notation cannot be removed from
your credit report.
If the credit bureaus change your reports based on the
letters you send, you are entitled by law to yet another copy of your credit
report reflecting the changes.
Cleaning up this mess won't be easy. Brutman expects it to
take several months of diligent effort. One wonders how much time all our
automated personal finance methods really save us, if it results in such a
chore after things go awry!
The sooner you straighten this out the better. Take good care
of your credit -- you never know when you'll need it!
See related: 12 tips for automatic bill payments, Cardholders must fight to correct credit report errors
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