Module 4: Building Credit
Keeping up with your personal credit report
You will want to manage your credit report regularly. This includes requesting reports from the three credit reporting agencies through annualcreditreport.com.
Once you have access to your credit reports, you’ll want to check for any inaccuracies, including:
- Incorrect mailing addresses
- Inaccurate Social Security Numbers
- Former employers
- Indicators of identity theft
- Errors in your credit accounts
- Inquiries that you don’t recognize
If there are errors, let the credit reporting company that shows the error know that an entry is incorrect. Credit companies generally have 30 days to investigate your claim and make a correction.
Look for late or incomplete payments and create a plan to manage your payments better. You can even use an automated payment service if you have trouble remembering a payment is due. If you carry balances of more than 35% of your available limit on credit cards, create a plan for paying those down. Meet with a credit adviser if you need to develop a workable plan. Set reachable goals and celebrate when you reach a milestone in your plan.
Recheck your credit after 30 or 60 days to see if the changes or updates you requested are reflected in the report. If you need to add an explanation, add a consumer statement to your credit report.
To protect yourself from identity theft and keep your credit healthy, enroll in a credit monitoring program that will notify you of critical changes in your report.
The Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) and associated amendments through the Fair and Accurate Credit Transactions Act (FACTA) define key regulations for consumer credit reporting, including the following:
- The purposes for which lenders and other businesses can obtain your personal credit report. The FCRA/FACTA restricts the use of personal credit reports to “permissible purposes,” such as an extension of credit, employment and insurance underwriting. Anyone using a personal credit report must have a permissible purpose.
- When you need to permit others to see your personal credit report. In some instances, such as for employment, consumers must provide prior written permission for others to request and view their personal credit reports. The FCRA/FACTA specifies when and how consumers need to provide permission for others to access their personal credit reports.
- Your rights to see your personal credit report. The FCRA requires each national consumer credit reporting agency—Equifax, Experian, and TransUnion—to provide a free copy of your credit report at your request, once every 12 months. In addition, you must be told if information in your file has been used against you. For example, suppose you are denied a loan because of negative information in your personal credit report. In that case, the lender must give you the name, address, and phone number of the credit reporting agency that provided the information that informed the decision within 30 days.
- Your rights to dispute incorrect information on your personal credit report. If you identify incomplete or inaccurate information on your report and dispute it with the credit reporting agency, the creditor must investigate unless your dispute is frivolous. A dispute may be considered frivolous if you are disputing everything on your credit report, whether it is incorrect or not. Beware of credit repair organizations that tell you to dispute everything on your report. Also, sometimes loan documents contain language that gives lenders the right to obtain your credit report at their discretion, which is common in an existing credit relationship. If so specified in your loan agreement, you may permit them to do so by signing the loan documentation.