Correcting Problems

Brace yourself for a battle because it is not uncommon for reports to have errors. Some lenders estimate that as many as 80 percent of all credit reports contain some kind of misinformation.

Identity theft is a growing problem and, as we talked about, one of the reasons you should check your credit report is to make sure that you aren't taking the rap for someone who has snatched your credit card number and made charges on it. Nothing is more frustrating than cleaning up a credit card account, then getting billed for more charges that you didn't make. Clear that up with the credit card company right away and you won't have to pay anything when you prove that the charges are not yours - but you want to make sure it doesn't haunt you on a credit report. For more information on preventing identity theft, go to www.privacyrights.org.

As if you need it, here's another good reason to winnow down your credit cards. Don't carry around credit cards that you rarely use and if you ever use a card at an ATM machine, pick a personal identification number (PIN) that isn't an obvious set of digits, such as your birthday, that someone could find in your wallet. A PIN should reflect numbers that mean nothing to anyone but you–the date you fell in love with your high school sweetheart or something.

MyFICO's report comes with a form to fill out if your bad credit rating is attributed to an account that isn't yours or a disputed amount. You should also contact the credit company that put the mistake up there and get them to correct it. If they don't correct it within 60 days, or if they disagree with you and won't change it, you have the right to put in an addendum of 100 words saying why that piece of information is incorrect.

The process takes time, because the creditors have 30 days to respond to a charge of a discrepancy. As long as a charge is in dispute, that dispute will still show up on your report.

Dolan Straight Talk Tip: If you're sitting in front of a loan officer to discuss a car or mortgage loan and you have a bad credit report due to a mistake, tell this person about the problem before you even begin to talk about the loan. Few reports are read by humans now; they're handled almost completely by computers, and computers can't interpret. So the burden falls upon you to show the loan officer exactly what went wrong and why the information is incorrect.

We know it's hard, but don't be tempted by credit repair services promising a "magic fix" to your credit report. Most of these companies are scams and their actions are illegal. We don't want you to end up with poor credit AND jailtime!

Conclusion

We remember one couple who contacted our radio show that learned the hard way how a credit record of slow payments hits you in all kinds of places. The couple's auto insurance company had just raised their premium for two cars by $200 a year, based on a credit record that put them in a high-risk bracket.

They wanted to know what their credit record had to do with their auto premiums. Well, it might have very little, but it tells insurers and lenders that they are running a risk of getting late payments from you, so they charge you more to give themselves a hedge.

So pay those bills on time and don't forget to check your credit report at least once a year to make sure it's accurate and up to date. It can save you money!

Keep yourself credit smart by reading our other articles here.

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