FLM Step 6: Andy Jolls on how to clean up your credit report

4/6/2009

In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness--one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month on a topic that is related to the day’s step. Their dedication to financial literacy is truly inspiring! Today, Andy Jolls, creator of VideoCreditScore and former FICO® exec, discusses how to clean up your credit report.

Many of us have score impacting errors on our credit reports. In fact, this is the reason that a good number of us can have a 50 point swing in our 3 credit scores from the three credit reporting agencies. Since it's a lot easier to correct bad data than to change your actual behavior, this is an important early step towards credit management.

Your most effective weapon in dealing with the credit bureaus is the Fair Credit Reporting Act (FCRA). You can read it if you'd like but here's the skinny. Legally, the FCRA protects you by requiring credit bureaus to furnish correct and complete information to companies requesting credit histories for evaluation. If you find an error on your report, simply follow these steps:

Write to the credit reporting agency disputing the item and include any supporting documents. Keep a copy of all documents for your files. Here is a sample letter. Send these letters certified mail return receipt requested.
When the credit reporting agency receives your letter disputing the item, they must investigate the item in dispute (usually within 30 days) by presenting the information you submit to the creditor.
By law, the creditor must review your evidence and report its findings to the credit bureau.
The credit bureau must then give you a written report of its investigation and a copy of your report if the report results in a change.

You can also fill out an online dispute form provided by the credit bureaus. But, I prefer offline filing as it allows you to keep a paper trail. The Web sites for the three major credit bureaus are:

If an item on your report is found to be an error and is corrected, you can request that the credit bureau send corrected copies of your report to any creditor who received your report in the previous six months or any employer who received your report in the previous two years. If you are not satisfied with the results of a formal dispute, you can also seek resolution with the source of the information. To do this, write to the creditor disputing the incorrect entry. After receiving your letter, the creditor may not report the information without including a notice of your dispute. In addition, once you have notified the source of the error in writing, it may not continue to report the information if it is an error. Do not use a company to do this for you. Many companies charge a lot of money and all they do is get power of attorney and write letters on your behalf. Stay away from companies that call themselves "credit repair" companies. When it comes to credit repair, listen to the FTC, who says "do it yourself".