Questionable lending practices, identity theft and rising interest rates have affected the financial health of many Americans, and protecting yourself and your credit score is a key factor in surviving economic ups-and-downs.
The first step to take in protecting your credit is to obtain – and understand – a copy of your credit report. Federal legislation enacted in 2005 entitles everyone to one free credit report each year. There are three main credit reporting companies that will provide you with a copy of this report free of charge: Experian, TransUnion and Equifax. Personal information such as your social security number, birthday and bank information is required when accessing your report, so be sure to use one of these three companies.
There are websites scams that claim to provide you with a credit report, but they steal your information to commit identity theft. Other companies will require you to pay to see your report, so it is imperative that you read the terms and conditions of the site and the fine print if you elect not to use one of the free reporting companies. If you have been a victim of identity theft or suspect that someone has attempted to use or change your information, it is a good idea to request copies of your report from all three companies so that you can compare the data on each. Viewing your credit report regularly is a good way to make sure no one is using your identity or account information. Since you are entitled to one free report per year from each of the three main reporting companies named above, you can request one every four months, thus keeping up to date with any activity in your accounts. Because as we all know, the sooner you catch identity theft happening, the better.
The report is divided into four sections that list your identifying information (SSN, address, employer, etc.), credit history, public records and credit inquiries. In the case of your credit history, there will be information on each lender, when the account was opened and the type of account it is, whether it is a revolving loan (credit card) or mortgage loan. There will also be specific information about the account, including amount of the loans, credit limit, how much is owed, monthly payments (fixed or minimum), account status (open, inactive, closed, paid), and how well the account has been paid.
Review the information carefully and take note of your credit score, which is also known as a FICO score. The score, which ranges anywhere from 300 to 850, is a general scale that relays your level of credit risk to a lender. The higher the score the better, and the better your score, the lower interest rates you will receive. Your credit score is always in flux based on payments, credit inquiries and more, so don’t be alarmed should the score change by a few points over a short period of time. Note that when someone checks your credit or pulls your credit report, for example when you apply for a gas card or department store card, it will cause your score to drop a few points. And too many “inquiries” (credit checks) in a short period will drop your score and flag you as a ‘credit risk,’ so you want to space them out.
Should you find a mistake on your credit report, such as an account you didn’t open or a bill you paid showing up as unpaid, it is necessary to complete the form that comes with the report. Additionally, you should tell the consumer reporting company, in writing, that you have found information you believe to be inaccurate. Include copies of documents that support your findings, and state that you would like the information corrected or removed from the report. The credit company should investigate the complaint within 30 days, unless they consider it to be a frivolous request.
After the investigation, the company must provide you with their findings and a free copy of your credit report if the disputed item was indeed incorrect and the correction changed the status of your credit. They must also provide a corrected copy of the report to anyone who has gotten a copy of your report in the six months prior to the investigation.
A proactive approach to maintaining your credit report is the easiest way to protect yourself and your family from identity theft or credit fraud. For more information regarding your credit report and score, or to obtain a free copy of your credit report, you can visit www.annualcreditreport.com. See their Frequently Asked Question page for lots of related info.