Solving Credit Report Problems
How to establish credit and address problems with your credit report
A: Many people wonder how they can get credit in the first place if they need credit history to qualify. Building a solid credit history takes a little time, but it can be done!
You may want to start with a retail credit card or gasoline credit card which are fairly easy to get. Make your payments on time and keep your debt low to establish a good credit rating.
Credit is not free, so use it wisely. Read the fine print before you apply for credit and make sure you understand the interest and fees you’ll be charged. Most importantly, don’t charge more than you can handle and make sure to pay on time. In general, no more than 20% of your take-home pay should go toward consumer debt (this does not include your mortgage or rent, but does include your car payment and all other credit.)
If you can’t qualify for a credit card yet, but don’t want to pay cash for everything, consider a prepaid card. You can load as much money as you choose on the card, and use it at the same places as you would a debit or credit card, but without the risk of overdrafts or going into debt. The Union Plus Prepaid Card requires no credit check.
A: Every time you apply for credit, the financial institution reviews your credit report or score. This creates and inquiry on your credit report. One inquiry is not likely to impact your score very much, especially if you have a strong credit history. But a large number of recent inquiries mean greater risk for lenders.
Not all inquiries will affect your credit score equally.
When shopping for a mortgage or a car, many people apply for several different loans to try to find the best rate. Therefore, a group of inquiries within a short period of time for a home mortgage or auto loan is not counted the same as multiple inquiries for other credit. So, go ahead and shop for that best rate – just try to get your shopping done within a 14-day period.
You may also see many inquiries on your report that you didn’t know about. These are often from businesses who are looking to do some sort of business with you; for example to offer you a pre-approved credit card. These types of inquiries, known as “soft inquiries" do not count against you. Finally, ordering your own credit report does not count as an inquiry.
Q: I've reviewed my report and made a list of problems. What's the next step?
A: Once you've reviewed your report and compiled a list of problem areas, you can either dispute mistakes online or write to the credit reporting agency at the address listed on your report. If you send a letter, be as specific as you can, and make sure you write very clearly. Remember, somebody at the other end is going to have to read what you wrote and try to understand exactly what the problem is.
If you have any proof of your side of the story, include all copies of documentation with your letter to the credit reporting agency.
Once the credit reporting agency receives your letter, it must:
- Complete its investigation within 30 days of receiving your letter
- Contact the creditor reporting the information you dispute within five days
- Review and consider all relevant information submitted by you
- Remove all inaccurate and unverified information
- Adopt procedures to keep the information from reappearing
- Reinsert the information only if the creditor certifies that it is accurate and notifies you within five days of the reinsertion, and
- Provide you with the results of its reinvestigation, including a new credit report, within five days of completion.
If the credit reporting agency claims that the creditor reporting the information verified its accuracy, contact the creditor to ask that it be corrected. Creditors who report information to credit reporting agencies must:
- Not report information they know is incorrect
- Not ignore information they know contradicts what they have on file
- Notify credit reporting agencies when you dispute information
- Note when accounts are "closed by the consumer"
- Provide credit reporting agencies with the month and year of the delinquency of all accounts placed for collection, charged off or similarly treated, and
- Finish their investigation of your dispute within 30 days.
If the creditor will not remove the incorrect information, call the credit reporting agency directly for help using the phone number supplied with the credit report you ordered. By law, each credit reporting agency is supposed to make a toll-free customer service line available for your questions and disputes.
If you get nowhere, you may want to file a complaint with the Consumer Financial Protection Bureau. Again, be as specific and clear as possible when you contact them.
A: The truth is that credit card companies want to keep their good customers. With competition so strong among card issuers, it is very expensive for them to get new cardholders. It's better for them to hold on to those they already have.
That’s good news for you. If you’re a good customer - that means you have a good credit score and you have you have been using that particular credit card - and you are willing to make a phone call, you may be on your way to a better rate. It doesn't hurt to ask. Tell your credit card company you’ve gotten great offers from other issuers. If you are prepared to close your account and switch to another card, tell them that. To keep your business they may reduce your interest rate.
Of course your other option is to take your business elsewhere! If you are shopping for a credit card with a competitive interest rate, be sure to check out the Union Plus Credit Card, which features exclusive benefits available only to union members.Q: About four years ago, I had some financial problems and got behind on some bills. But I paid them off a couple of years ago. Why are they still on my credit report?
A: Late payments can stay on your report for up to seven years, even if you paid the bill in full. Some lenders are interested in late payments that are several years old, while others are more concerned with how you've been handling your bills lately and will overlook older negative information.
Q: It's not fair! I'm on top of my finances now and I don't think the past should count against me for seven years.
A: It's understandable that you want your credit report to be judged on how you're doing now financially, rather than what happened several years ago. While some lenders will be more than happy to lend you money now as long as you are caught up, others may decide it's too risky. Just keep trying to build positive references so that when you do apply for loans, your credit report will show that you can handle your bills.
Q: What about these companies I read about that say they can fix bad credit - even bankruptcy? Can't they get information taken off my report?
A: Wouldn't it be great to be able to wipe out the past and start over again? Unfortunately, that's what these companies prey upon - the desperate hopes of people who just want a fresh start. Credit repair companies, or credit clinics, often charge steep fees, but they can't do anything you can't do on your own.
Their usual strategy is to dispute negative information over and over, hoping that some requests will fall through the cracks and will not be verified. If a credit reporting agency fails to verify information you dispute, they have to remove it from your file. The problem is that credit reporting agencies can refuse to investigate repeated disputes if they think you're working with a credit clinic. Also, they can put the information back on your file if it's later verified as correct. Most people who hire credit clinics to clean up their credit reports pay a lot of money and get little for it.
Don't confuse credit repair companies with non-profit credit or debt counseling agencies that work with consumers to help them pay back their debts. If you can't keep up with your bills, one of these agencies may be able to help. See Union Plus Credit Counseling for more information.
Q: I've had a lot of problems straightening out my credit report. I really feel like I've been getting the runaround from the credit reporting agency. What can I do?
A:If you have unsuccessfully tried to resolve a problem with your credit report, you can file a complaint with the Consumer Financial Protection Bureau at ConsumerFinance.gov.
Your state or local consumer protection office may also be able to help you. Look in the government pages of your phone book or visit ConsumerAction.gov to find your state consumer protection agency.
You may want to talk to an attorney. Union Plus offer a legal services program that entitles you to a free consultation with an attorney in your area and discounted rates if you decide to pursue the case. For the name and phone number of an attorney near you, click here.