Make no mistake, your credit report is important. It's used when you apply for a mortgage, car loan, credit card, or want to rent an apartment.
Credit reports are kept by credit reporting agencies (CRAs), which collect information from lenders. The CRAs organize the information so that when you want to borrow money, a potential lender (like a car dealer) can request your history. A federal law called the Fair Credit Reporting Act (FCRA) controls how your information is collected, used, and corrected.
Independent studies indicate that about 70 percent of all credit reports contain errors, and about one in four have an error big enough to cause credit to be denied. In fact, the Federal Trade Commission (FTC) advises checking your credit report before making any major purchase.
If you are denied credit because of a report, the company denying credit must tell you which CRA they used to obtain the information. When this happens, you have a legal right to request a free copy of the report - as long as you ask for it in writing within 60 days.
Unfortunately, the CRA is not required to seek out errors in your report. Their only responsibility is to list what is reported to them by creditors, include any statements about errors from borrowers, and correct any errors found.
Once you receive your credit report, you must determine whether it's accurate. Accurate information stays on the report for years. Most items stay on the file for seven years, although records concerning bankruptcies show up for ten years.
If you find an error (a payment erroneously listed as late, for example), you must contact the CRA by phone and by registered mail.
Your correspondence should state specifically what the error is and provide proof to support your claim. The agency is required to investigate the claim within 30 days. They must also forward any relevant information to the lender involved.
The lender must also investigate the claim. Both the company providing the inaccurate information and the CRA are responsible for correcting any errors. And, if an item is incomplete, the CRA must include additional relevant information for the file. For instance, if you were late with a payment but now are current, the report can't show your account as delinquent.
Once the investigation is complete, the CRA must send you a copy of the report. If you ask, they must also send revised copies to anyone who has received your report in the last six months.
If you feel either the lender or agency isn't responding to your requests, you can report them to the Federal Trade Commission. But don't get your hopes about this: The FTC will only look at complaints if they find a pattern of abuse. They will not arbitrate individual complaints.
The three major credit reporting agencies are:
Equifax, PO Box 740241, Atlanta GA 30374-0241; 800-685-1111
Experian, PO Box 2002, Allen TX 75013; 888-experian
Trans Union, PO Box 1000, Chester PA 19022; 800-916-8800
Gary Foreman is a former Certified Financial Planner who currently edits
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