Swati Arora

Lifestyle - Writer
New Delhi - India

    Credit Repair – Use it or lose it

    March 12, 2017

    You’ve decided to do something about your credit report. Perhaps you want a bank loan. Maybe you want to buy a house. Maybe a landlord wants to see your credit record. Or your prospective employers, especially if you are applying for a job that requires a security clearance. What can you do for yourself as easily and cheaply as hiring a professional firm?

    First, understand that reporting errors are very common. Sky Blue Credit, one of the more reputable credit repair companies, notes that, according to studies done by public interest research groups, 79% of all credit reports contain errors. Some may be relatively harmless, but 60% of reports reviewed contained serious errors that led to the victims paying premium interest rates and even being denied credit.

    If your credit report contains wrong and harmful information, you have the right to demand an investigation, free of charge, into every piece of information you find that you believe to be inaccurate. And the reporting agency must respond and correct it within 60 days.

    Who are the major credit bureaus? The industry is dominated by Experian, Equifax and TransUnion. There are others, but for most people, these are the agencies we are dealing with. They are not charities or government entities. They are profit-making corporations who deal in information and data collected on hundreds of millions of people.

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    All three collect and process information a little differently, so their scores are never the same for the same person being investigated. There are several reasons for this. For one thing, not all creditors report to all three companies. The companies do not process their information at the same time and may be operating off of different figures. In addition, the software they use is periodically updated and one may be using an earlier version than the others are.

    Institutions looking at your credit report may look at one (and not necessarily the best one) or may get a combined report. None of the three are likely to be far from the other two, but sometimes they vary by a hundred points or more. And anyway, a few points matter. As a citizen, you have the right to a free credit report from each company every year if you want. You can request these reports through AnnualCreditReport.com.

    Here are a few actions you should be aware of that can have a negative impact on your score. Every time you apply for credit, your score goes down. Applying only for clear and justifiable reasons will help protect your credit score. When exploring a purchase that may require a credit check, be sure to give permission only if it looks like a realistic option. Responding to an invitation to apply for a “pre-approved” credit card counts as though you initiated the request, not them. And as no one should have to be told, “pre-approved” does not mean pre-approved. It means “we got your name from a data base somewhere.”

    Opening a new account will further lower your score, but this is only temporary as long as you maintain a steady, on-time payment history. There’s no way around this.

    Keeping high balances relative to your total available credit is a negative factor, too. As much as possible, pay off all balances regularly.

    Certain types of debt are assessed as more negative than others. Using store cards indicates purchases that often cost more than the customer can afford, and which may include a ploy like a zero-down payment option that explodes into high interest after a period of time.

    Finally, inactive accounts, despite showing no debt and no late payments, can hurt your score, so either use the account periodically or shut it down.

    Read Swati's other blog entries >

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