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Dispute Credit Report: Ways to Dispute Credit Errors

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Dispute Credit Report Errors

Credit reports have increasingly become consumers’ passport to the financial world. Whether you want to rent an apartment, get car insurance or apply for a credit card, the data in your credit report will be one of the crucial measures used to judge you.

That’s why you want to ensure that the information in your report — which is used to formulate your credit score — is free of any inaccuracies. Even if you’re not denied credit, a small error here or there can cost you more in interest.

The three big credit bureaus — Equifax, Experian and TransUnion — and the entities that provide them with data (like lenders) are required to investigate any potential errors. But, as I reported in a recent story, their investigations aren’t very thorough.

So as with most everything else, you need to be your own advocate. Here are several tips on the right way to file a dispute, compiled from consumer attorneys, credit experts and consumer advocates.

Get your report. There’s only one place you should go to get a copy of your credit report: AnnualCreditReport.com. All consumers are entitled to one free credit from each of the three major credit bureaus through this site. (In fact, you can forgo the credit monitoring services many of them sell by creating your own: simply order a report from one of the agencies once every four months.)

Create a paper trail. The credit bureaus allow you to file your dispute online, and it’s probably the fastest and simplest way to go. But don’t. Experts say it’s better to send a written dispute via certified mail (return receipt requested).

Sending a written complaint may not help resolve your problem any more than filing an online dispute. But it will help later on, say, if your problem isn’t resolved or if you eventually need to show a record of your efforts in court.

Don’t be restricted by the dispute forms that the bureaus recommend you use. Experts recommend coloring outside of those lines. Attach a letter that explains the problem, and provide copies (not originals) of any supporting documentation, like a canceled check illustrating that you made a payment. The Federal Trade Commission has a sample dispute letter on its Web site.

The credit reporting bureaus are required to forward all relevant information to the organization that is the source of the error, though consumer advocates and lawyers told me this never happens. (In fact, the system the bureaus use to communicate with creditors doesn’t allow them to forward any attachments. Instead, workers boil down all the information you send into a one- to three-digit computer code — for instance “account not his/hers.” That’s what is forwarded to the creditor, who must then perform an investigation of its own.) More at How to Dispute Credit Report Errors

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What is My Credit Score: FICO® Score Estimator

“Wondering what your credit score is? Let the FICO Score Estimator help. Check it out below now!”

The Question

How FICO Scores Work
When you apply for credit – whether for a credit card, a car loan, or a mortgage – lenders want to know what risk they’d take by loaning money to you.

FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus – Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. As this information changes, your credit scores tend to change as well.

Your 3 FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time.

Taking steps to get your FICO scores in the higher ranges can help you qualify for better rates from lenders.

Higher FICO Scores = Lower Payments
The higher your FICO® scores, the less you pay to buy on credit – no matter whether you’re getting a home loan, cell phone, a car loan, or signing up for credit cards.

You can roughly estimate your actual credit score with this free score estimator from FICO®, the most trusted name in credit scoring. Here’s how it works: Answer these ten easy questions and we’ll give you a free estimated range for your three FICO® scores.

What do you mean I might not have a score?
You won’t have a credit score unless you’re older than 18 and you’ve had a credit card in your own name for longer than six months. So, if you’re young or you pay with cash, you likely don’t have a score. Or, if you’re young and have only had a single credit card for a short period of time, you may not have a score yet either. So go ahead and answer the questions and get an idea. It’s free, it’s easy, and you don’t have to give up any personal information.

1. How many credit cards do you have?
I have never had a credit card
1
2 to 4
5 or more

2. How long ago did you get your first loan?
(i.e., auto loan, mortgage, student loan, etc.)
I have never had a loan
less than 6 months ago
between 6 months and 2 years ago
2 to 5 years ago
5 to 10 years ago
10 to 15 years ago
15 to 20 years ago
more than 20 years ago
More at FICO® Score Estimator

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How to Increase Credit Score

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How to Increase Credit Score

Most New Year’s resolutions require consumers to spend money, but here’s one that actually doesn’t cost anything and ultimately helps people save: Boost your credit score.

Low credit scores result in higher interest charges for all types of debt, including credit cards and home loans. Borrowers with a FICO credit score (the score used for most consumer lending decisions) of 700 save an average of $648 in interest on their credit card, $1,392 on their car loan and $2,340 on their mortgage each year, compared with borrowers who have scores below 620, according to a study by CardHub.com , a credit-card comparison website. Those savings get even larger for borrowers whose credit score is above 700. Separately, lower scores can lead to larger home and car insurance bills and make it harder to rent or buy a home.

Fortunately, there are ways to improve a low credit score and most involve scaling back on credit-card usage. That’s because in the world of credit scores, all debt is not treated equally. FICO scores tend to drop as consumers rack up more credit-card debt but don’t decline as much if someone signs up for a student loan, car loan or mortgage. Here are five steps to improving your credit score.

Pay down credit-card debt
To improve their credit scores, borrowers need to lessen their credit-card debt.

Once a borrower surpasses a 10% “credit utilization ratio” — that is, the amount of their credit card debt in relation to their total spending limit — their FICO score will likely drop, says John Ulzheimer, consumer credit expert with CreditSesame.com, a credit-management site, and a former manager at FICO. For instance, borrowers whose credit-card spending limits total $10,000 should not surpass $1,000 in debt — whether or not they pay off their balance in full each month.

That can be an onerous task for many borrowers. They’ll need to adhere to stricter limits if they want the highest score possible. According to FICO, borrowers with the best credit scores — of 785 or greater — use an average of 7% of their total credit-card limit. In contrast, student loans, car loans and mortgages are not considered by the credit-utilization ratio.

Consumers can consider asking their card issuers to increase their credit-card limits, which could in turn increase their credit score. Of course, that will require not swiping for more purchases on those cards.

Convert credit-card debt to personal loans
Borrowers with a lot of credit-card debt aren’t out of luck. They can actually improve their score before they even pay down their debt — with a bit of strategizing: They can consider rolling their credit-card debt into a personal loan.

Here’s why: Credit-card debt tends to be more damaging to credit scores than a personal loan, which is considered installment debt. The credit-utilization ratio (see previous section) does not take installment debt into account. This strategy would result in zero dollars of credit-card debt on the borrower’s credit report, which could boost their score by 100 points or more, says Ulzheimer. They’ll also pay lower rates to boot: The rates on personal loans currently average 11.36%, according to Bankrate.com. In contrast, rates on credit cards average just over 13% to 15.4%.

This strategy will only help borrowers if they stop using their credit cards or if they pay off the charges they make on their card quickly. Otherwise, their score won’t stay up for very long. Of course, consumers should pay off all their credit-card debt with their savings rather than signing up for a loan. But that assumes they have enough cash set aside after paying this debt for their emergency fund. (Financial advisers typically recommend people have savings equal to six to eight months of living expenses in a savings account.) More at 5 ways to boost your credit score

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