Give Yourself Credit
Cleaning up Your Credit History
by Darryl Byrd
The morning paper comes and while glimpsing the latest Clinton political imbroglio, your eyes fix on something too good to be true. So mind-blowing is the sale on Fubu sportswear at your local department store that you figure now is the time to stock up and finally fall in with the hip crowd.

You grab your car keys, but suddenly notice your wallet is feeling a bit light. You crumble onto your sofa, disheartened. Before your body has even left an impression, your mind screams: 40 percent off!

Sure, the sale is too good to pass up, but you are still short on funds. But, you think, if you skip your MasterCard and Sears payments this month….

That is often how credit woes begin. You skip a month or two, stuff happens, and you never manage to catch up. Maybe a bankruptcy, foreclosure, or charge-off (when a company eats the unpaid balance on your account) looms in your past. Or perhaps you have played fast and loose with too much available credit or applied too frequently for that treasured plastic.

If this sounds all too familiar, you may be one of those unfortunate souls caught trying to outrun the fast-rolling credit avalanche threatening to pancake your good credit rating.

Virtually every time you are late on a credit card, car, or mortgage payment, the lender reports your delinquency to a credit agency. Perhaps one day you will manage to extricate yourself from that financial quicksand. Freeing yourself from that sinking morass of debt may seem worlds easier than shaking off the credit muck that still clings to you.

A dubious credit rating can doom you to years of high-fee, high-interest credit cards. Worse, it can torpedo your chances of securing mortgages, car loans, apartment rentals, insurance, new jobs, or even a membership at your neighborhood video outlet.

That these troubles can be the result of your own bad judgement is tragic, but that you can suffer the same misery at the hand of another turns the knife an extra twist.

"There could very easily be errors on your credit report. It happens all the time," says Judy McCoid, Vice President of Education for Consumer Credit Counseling Service of Greater Washington, in Rockville, Md. "It’s very easy for someone to transpose a number on an account and for someone else’s information to appear on your report. I’ve seen cases where men have had all of their son’s information on their credit report because they have the same names, but one was a senior and one was a junior. Even with two different social security numbers the information appeared on one report.”

Therefore, even if you believe your credit spotless it pays to regularly check under the hood. The good news is that even a credit history littered with black marks can be cleaned up.

Here's how.

Obtain Your Credit Report

Lenders calculate a consumer’s credit rating, or score, using factors such as where you live, your income, tenure at your job, number of credits accounts, patterns of payment, etc., "and in most cases, a consumer does not have access to that rating," says K. K. Srinivasan, president of WorthKnowing.com (www.worthknowing.com), an online site that provides consumers free information about credit reports, credit scores, and ways to improve their credit scores.

Reviewing your credit report offers a broad understanding of your credit health, and allows you to ensure the information is accurate.  You can obtain your credit report several ways. 

Contact one of the three credit reporting agencies:

Consumers who are residents of Colorado, Georgia, Massachusetts, Maryland, New Jersey, or Vermont may receive up to two free copies each year, Srinivasan says.

Otherwise, expect to pay up to $8 for each copy.  Some websites allow consumers to view their credit reports online for a fee ranging from $6.95 to $49.95.

According to the Fair Credit Reporting Act, if you have been denied credit, insurance, or employment within the past 60 days you can get a free credit report from the agency that issued the negative report.

Once you have your credit report focus on delinquencies, the amount of available credit you are using, and the frequency of applications for new credit. Examine the report for incorrect or dated information, such as late payments, paid judgements from lawsuits, paid tax liens, and nontax liens, which can be removed from your record after seven years.

Dispute Any Errors

Should you find errors on your credit report, the Fair Credit Reporting Act gives you the right to fire off a letter of explanation or dispute to the credit bureau. This forces the bureau to verify your information with the creditor, correct the error, and reply within 30 days. You will receive a corrected report. You also have the right to add a 100-word explanation of any problem to your credit report. Anyone requesting a copy of your credit report will also get a copy of your statement.

The new Fair Credit Reporting Act compels the credit bureau you work to correct any erroneous information with the other two, though Srinivasan offers this advice: “to ensure that each of the three major bureaus reflects the changes, it is imperative that consumers contact all three bureaus.”

Even if the information you discover that is incorrect is negative, “you need to make it accurate,” McCoid says. Negative information stays on your credit report for seven years, bankruptcies remain for seven to 10 years, and inquiries remain for two years. After that, it should vanish from your report. However "if you find information on your credit report that is older than seven years from the date of last activity, "McCoid says," you should dispute it with the credit bureau.

Beautify the ugly truth

Unfortunately, only 20 percent or less of consumers will be fortunate to find faulty facts in their credit files. That means the information is accurate for about 80 percent of consumers. Lousy credit is one instance when accuracy counts against you.

"Once an account is delinquent it is not possible to change that status. Accurate information cannot be disputed, removed or changed," Srinivasan says. "The best remedy for a once-delinquent consumer is to change that pattern of behavior and pay on time. Recent on time payment behavior usually compensates for any delinquent behavior in the distant past.

There is no magical formula for instantly improving one’s credit -- it is a process that takes time and effort."

The ease with which a consumer can improve a blemished credit report depends on the damage, he says.

"A bankruptcy is a blemish that takes 7 years to correct, while a few missed payments become less important after 12 months," says Srinivasan. "A consumer who has applied for credit too frequently needs only to stop applying for credit for a year to notice an improvement, and paying off debt is the fastest way to improve a damaged credit rating."

Slow and steady wins the credit repair race.

McCoid suggests consumers with credit rating woes obtain a secured credit card from a reputable bank, use it responsibly for a year, and then approach the bank about getting more credit. This new pattern of payment behavior "is reported to the credit bureaus and will help you rebuild your credit. But you don’t do it overnight.”

Not consumers, nor credit-repair services whose ads that appear in newspapers, direct mail offers, and on the Internet claim the ability to wipe your credit slate as easily as one might shake the picture from an Etch-a-Sketch. No matter what such ads claim, consumers cannot erase accurate, negative information from their credit files. 

"You can correct information on your credit report if it is not accurate,” McCoid says. “But only time can get rid of negative, but accurate information.”

SIDEBAR: Contact Numbers

How to contact the major credit bureaus:

Organizations that help repair bad credit or manage debt:

Debt Counselors of America: 1-800-680-3328

National Foundation for Consumer Credit: 1-800-388-2227