Personal Business: Credit
CREDIT-RATING AGENCIES RATE ABITOF CREDIT
In the past three years, credit bureaus have done their best to improve their record. They have tried to reduce errors through increased automation and better software. And they have tried to improve consumer relations with easy-to-read reports, 800 numbers, and faster response to complaints. It's still not easy to clear up a mistake, but the industry's new dispute-resolution process should make dealing with credit bureaus less of a burden.
You should check your record once a year for accuracy and completeness. For a copy of your report, call one of the national credit bureaus, such as TRW (800 682-7654), Equifax (800 685-1111), or Trans Union (216 779-7200). If you've been denied credit, you're entitled to a free copy. Otherwise, most agencies charge a fee of about $8. TRW will send a free copy in "plain English" once a year.
If you find mistakes, file a dispute form, and wait for a response. "But be prepared to live in Nightmare on Credit Street," says Ed Mierzwinski, consumer advocate at the U.S. Public Interest Research Group. Response is slow, and errors often reappear after they have been corrected, he says. For help communicating with credit bureaus, the nonprofit National Center for Financial Education (NCFE) publishes the Do-It-Yourself Credit Repair and Improvement Guide. Call 800 837-6729 to order this $10, 44-page book.
E-MAIL REPLY. Credit bureaus hope their new dispute-verification system will smooth out the process and appease critics. The system replaces the U.S. mail with electronic mail, so it will take days, not weeks, to correct errors. Best of all, consumers will need to get in touch with only one of the national bureaus to have them all correct a mistake. About 85% of the industry should be on board in two years. More pro-consumer reform is expected out of Congress, which is considering bills requiring bureaus to offer free reports and do more to avoid errors.
Even if your report is correct, it may contain information you didn't know would hurt your ability to get credit. For example, lenders look at all your available credit--not just the amount you actually owe--when deciding whether you can handle more credit. Before applying for a loan, consider canceling cards you don't use--so you won't look overextended. And ask the issuer to add the line, "account closed due to consumer request" to your report. That way, it won't seem as if the lender revoked your credit.
Too many applications for new credit might signal to lenders that you are "credit-thirsty" or perhaps nearing bankruptcy, says Paul Richard, the NCFE'S director of education. But this alone won't be too damaging as long as the rest of your report is clean.Amey Stone