Avoid a credit scare by seeing what lurks in your credit reports
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“Many people we speak to are horrified at their credit report,” says April Lewis-Parks, director of education with Consolidated Credit Counseling Services. That’s because if you don’t regularly monitor your credit health, it’s like walking through a creepy corn maze — something terrifying could jump out when you least expect it. For many consumers, that moment usually ends up being when they’re applying for a loan or line of credit, only to find out that their credit report is a bloody mess.
To avoid a credit scare, the No. 1 rule is to pull your free credit report from each of the three credit bureaus (Experian, Equifax, and TransUnion) once a year from AnnualCreditReport.com. Some experts recommend spacing out your requests so that you get one each quarter.
As for what to look for, keep watch for these spine-chilling scenarios that could turn your credit report into a fright fest.
Many people we speak to are horrified at their credit report.
|— April Lewis-Parks|
Consolidated Credit Counseling Services
Paranormal activity:Unexplained accounts that seem to appear out of nowhere.
Bad omen: Besides checking your credit reports regularly to spot accounts you never opened, you should also keep tabs on your own billing statements, says Rod Griffin, director of public education for Experian. You want to make sure that every transaction belongs to you. “Also, watch your mail for items such as collection notices,” he says. That could indicate you are a victim of fraud if you don’t recognize the claim.
Another red flag could be increased correspondence from loan companies, says Lewis-Parks. “A lot of times their mailings are triggered by high debt. If you get a lot of these mailers and aren’t carrying a lot of debt, it’s cause to check it out and see what’s going on,” she says.
Fight the demons: If you find accounts that don’t belong to you in your credit report, immediately request an initial security alert with one of the three bureaus, suggests Griffin (whichever one you choose will notify the other two). “This will warn lenders that you may be a victim and provides protection as you take any additional next steps,” he says. If you confirm that an invasion by the credit snatchers has taken place, the next move should be to file a fraud report with your local police department, notify the creditors reporting the fraudulent information and dispute the account with the credit bureaus. Police report in hand, you can than add an extended fraud victim alert to your credit report so no other accounts can be opened in your name as the investigation plays out.
Night of the living debt:Just like a zombie, errors keep coming back to life, and could affect your credit score if you don’t deal with them head on.
A bad omen: “You don’t want to find out when you apply for a car loan that your credit score is in the toilet for stuff you never did. That’s scary!” says Kyle Winkfield, managing partner at O’Dell, Winkfield, Roseman & Shipp, a retirement and income planning firm. For instance, he says, you might see that you have a judgment on your credit report for a medical bill you remember paying.
Even small errors — such as misspellings or wrong addresses — can lead to problems later on if not dealt with, says Lewis-Parks. For example, if you have a name in common with someone else, some of his or her activity might be appearing on your report. “The onus is on you to prove something is wrong. Nip in the bud as soon as there’s cause for alarm, or some indicator that something is not right,” she says.
Fight the demons: To fix errors, you can start by submitting a dispute to the credit bureaus online, by phone or by mail. They will in turn contact the original source of the information. Lewis-Parks says although the bureaus can take it from there, it doesn’t hurt to also contact the creditor on your own as well to speed the process along. Be prepared to upload or mail copies of documentation supporting your dispute. “The most important thing to do is to be specific. ‘This is wrong,’ isn’t specific enough,” says Griffin. Instead, say something like: “I paid this bill in September 2012, and here is a copy of the canceled check.”
You don’t want to find out when you apply for a car loan that your credit score is in the toilet for stuff you never did. That’s scary!
|— Kyle Winkfield|
O’Dell, Winkfield, Roseman & Shipp
Haunted history: If your past is full of dark debt and delinquencies, your financial house might be akin to The Amityville Horror.
A bad omen: If you miss just one payment for more than 30 days, it will remain on your credit report for seven years. Bankruptcies and tax liens stay on even longer, for 10 years. “It’s of the utmost important to pay your bills on time, as that represents 35 percent of your credit score,” says Lewis-Parks.
Fight the demons: The good news is a poor credit history doesn’t have to haunt you forever. “The further in the past negative information occurred, the less impact it has on credit scores,” says Griffin.
Once you begin “cleaning” your credit house, your score will improve over time if you continue to pay all of your bills when they’re due. Also, try not to carry large balances on your card month-to-month, since debt utilization is the second biggest factor in your credit score. “Don’t use your credit like phantom money. Use plastic in lieu of cash that you already have,” Linkfield says.
The debt doppelg\xe4nger: When your identity is latched onto by a debt collector for an account that’s not yours.
Bad omen: Thirty-eight percent of complaints filed with the Consumer Financial Protection Bureau about debt collection were from people who said the debt did not belong to them, making it the top gripe, according to a March 2016 report. What’s worse than annoying calls and threatening letters, however, is if that false information infects your credit report.
Fight the demons: In addition to carefully reviewing your credit report for collection accounts that don’t pertain to you, also check for aliases in your personal information that you don’t use, says Lewis-Parks. Your credit report is supposed to list all name variations you’ve ever used to apply for credit, but if you know for a fact you’ve never opened an account using a nickname or initials, it could be your doppelganger causing trouble.
To stop collections requests (and hopefully get them to update your status with the credit bureaus), promptly send a letter to the collector to cease and desist communication, and then lodge a collection complaint with the CFPB, says Lewis-Parks. The CFPB will then contact the company on your behalf and expedite your request. Once that’s taken care of, follow up with the credit bureaus to be sure the item has been removed from your credit reports.
With regular reviews, your credit reports aren’t likely to cause any nightmares. Check yours out today… if you dare.