How Your Credit Report Affects Your Financial Success
By Ric Edelman
Anyone who has ever applied for a loan or credit card knows how important a credit report can be. Negative or inaccurate information can thwart your attempts to buy a car, buy a house or even open a bank account. To help you understand the role that credit reporting plays in your financial success, we interviewed Maxine Sweet, vice president of consumer education for Experian Information.
Ric: How often should people obtain their credit report?
Maxine: Generally, you should obtain a copy of your credit report once a year. If you’re about to make a major purchase, such as a car or a house, you should at least get a copy two to three months before you make the purchase just to give yourself time to clear up inaccuracies.
What should you be looking for on a credit report?
You want to make sure your name is spelled right, that your Social Security Number is accurate and that all the accounts reported belong to you and are up-to-date and accurate. You also want to make sure that no one else's credit information is on your report.
We often hear horror stories of people who are denied credit because of erroneous information on their credit report, which they then have difficulty getting corrected. How common is this problem?
Of course there are a few consumers who have problems such as this, but considering the overall volume of credit, it certainly isn’t the norm. If you see something on your credit report that isn’t yours, call the credit reporting agency. The agency will then call the source of the information to verify it. If they verify it, then it’s generally up to the consumer to contact the creditor directly. That way, you can work with the creditor to provide additional information that will get the item removed from your credit report.
How long do bad debts appear on your credit report?
That is probably one of the most common questions consumers ask because negative information has such an impact when applying for loans. Generally, information about an outstanding debt or missed payments will stay on your report for seven years. Bankruptcy will also be reported from seven to 10 years. So this information has a very long-term effect on your credit.
What is your opinion of credit repair agencies that say they can "clean up your credit record?"
First of all, no one can "fix" your credit except you, through timely payments over an extended period of time. According to the amendments passed as part of the Fair Credit Reporting Act, credit repair agencies cannot advise you to lie or change your identity in order to escape bad credit, because that’s fraud. Nor can they charge you up-front for their services. You should pay only after they deliver what they promise.
As long as these companies follow the law, consumers are fairly protected. But it’s often difficult to even find the companies if a consumer has a complaint. They work only through 800 numbers, and there aren’t enough law enforcement officers to track them down. So your best defense is to avoid them.
How can consumers get copies of their credit reports?
You can get a copy from Experian by calling 888-EXPERIAN, 7:30 a.m. to 7:00 p.m., Monday through Friday, Central Time. You should have it within a week. You can also go to our web site at www.experian.com.