New Year's Resolution: Clean Up Your Credit Report

Posted December 30 2016
by PenFed Team
Dart board with "2017 goals" in center

Cleaning up your finances is a lot like cleaning out your closets: there’s a lot of dust and a little bit of drudgery involved. It seems so much easier to check your credit report, resolve to do better, and start paying more attention to your budget from here on out.

But what you don’t know can come back to haunt you. Cleaning up your financial act starts with shaking out whatever skeletons and cobwebs are lurking in your financial closet. It all starts with a thorough shakedown and review of your credit history.

Give your credit report the deep clean it deserves

To begin the new year with a clean financial record, you need a thorough review of your credit report. Your credit report is a collection of all your personal credit information provided by your various creditors and lenders. It includes data on credit and bank accounts you’ve opened, your payment history, your credit limits, and your current account balances.

Your credit report is maintained by three main credit bureaus: Equifax, Experian, and TransUnion. A credit report is not the same thing as a credit score. Your credit score, which is the number you hear so much about when you’re trying to get credit or a loan, is calculated based on the information in your credit report.

Incorrect data in your credit report can wreak havoc on your credit score, so reviewing your report regularly is a smart habit to develop. Common credit report issues include:

  • Mix-ups involving people with the same name as yours
  • Incorrect address listings
  • Leftover data from an ex-spouse
  • Outdated information
  • Account issues that have been remedied but not reported
  • Incorrect reporting from a creditor or lender

A review of your credit report could even reveal that someone has stolen your identity and is using your name and credit rating to open credit accounts linked to their address.

The solution? Review your credit report every year.

How to obtain your credit report

Everyone is eligible to receive a free copy of their credit report once a year through AnnualCreditReport.com. Beware of other websites and companies that charge money to provide your report. Use AnnualCreditReport.com to avoid scams.

When you request your free credit report, you can obtain a report from one or all three of the main credit bureaus. Some people like to review all three, while others choose a different credit bureau to review each year.

Your credit score is not part of your free credit report, but there are several ways to find out your number for free. If you’ve been turned down for a loan because of your score, you should be able to check your score at no cost. If you’re a PenFed member and you have an active checking account, installment loan, or revolving line of credit (such as a credit card), you can check your FICO credit score any time you log in to PenFed Online.

Check for errors

Once you have a copy of your credit report, review the entire report. Examine all versions of your name, and check your address and contact information.

If you find an account listing you don’t recognize, research it. If the account doesn’t belong to you, request to have it removed from your report. Review older accounts to ensure your current contact information is correct and that the information that’s being report is accurate. If there are accounts you are considering closing, before doing so, make sure you evaluate how many accounts you have, what they are costing you, what you use them for, and how they may affect your credit score.

Incorrect information

If you find something that’s not right on your credit report, the credit bureaus are required to correct or remove it. To do that, you have to do what’s called disputing the information.

1. Inform the credit bureau(s) of the issue in writing. Follow the example of this sample dispute letter from the FTC. Include an itemized list of inaccuracies, explain the facts and why you are disputing the information, and request that they delete or correct the information. Attach copies (never originals) of documents that support the correct information. Send your letter by certified mail with a return receipt requested, so you can prove that the credit bureau received your letter. Keep copies of everything you send.

The credit bureau must investigate your claim within 30 days. It will respond in writing, including another free copy of your credit report if the dispute resulted in any changes.

2. Contact the company that reported the inaccurate information to the credit bureau. Use this sample letter from the FTC. Many creditors and lenders provide a special address for billing disputes, so make sure to choose the correct address. Once again, include a clear list of issues, explain the facts and whether you’re requesting a correction or deletion, and include supporting documentation (never original documents).

Companies are required to notify credit bureaus of disputed information. They will request that the information be removed if it’s found to be inaccurate.

Nonprofit credit counseling assistance

If you decide you need help sorting out issues with your credit report or credit score, don’t waste money on a paid service that promises to boost your score for a certain amount of money. Instead, choose a nonprofit credit counselor.

Credit counselors can give you advice on managing your money and your debt and show you how to develop and follow a budget. Professional counselors are usually certified, and they’re trained to counsel people about consumer credit, budgeting, and managing debt.

To find a credit counselor, use the local search tools from the National Foundation for Credit Counseling. For more advice on choosing a credit counselor, consult the FTC.

Don’t let a credit report foul-up needlessly ding your credit score. An annual review of your credit report will help you start your new year off on the right foot!