Week One: Reviewing Your Credit Reports

Week one of the plan starts with credit for a simple reason: it is the part of your financial picture that takes longest to correct. If something on your report is wrong, you want to find it now, not when a lender points it out.

Where to get your reports

Federal law gives you the right to free copies of your credit reports from each of the three nationwide credit bureaus: Equifax, Experian and TransUnion. The official place to request them is AnnualCreditReport.com. The bureaus now let you check your reports online for free every week, so there is no need to space them out.

Request all three. Not every lender or collector reports to every bureau, so the reports can differ. Be cautious with look-alike sites and apps that ask for a card number before showing you a report. You do not need to pay or enroll in anything to see the reports the law provides.

What a report shows, and what it doesn’t

A credit report is a record of how you have handled credit. It typically includes:

• Identifying details such as your name, current and past addresses, and sometimes employers
• Credit accounts, including credit cards, auto loans, student loans and any existing mortgage
• Payment history for each account, including late payments
• Collection accounts and certain public records, such as bankruptcies
• Inquiries, meaning a list of who has requested your report

Your report does not show your income, your savings or your credit score.

Reports and scores are different things

Credit scores are calculated from the information in your reports using a scoring model. There are many models, and the score a mortgage lender uses may not match the one you see in a banking app. Rather than worrying over a single number, focus this week on making sure the underlying reports are accurate. Scores follow the data.

A line-by-line review

Set aside an hour, open the three reports side by side, and work through each section with a highlighter or a notes page.

Personal information

Check how your name is spelled and review the addresses and employers listed. An address where you have never lived can mean your file has been mixed with someone else’s, or it can be an early sign of identity theft.

Accounts

Make sure you recognize every account. Confirm that each one is correctly marked as open or closed, and that balances and credit limits look right. An account you paid off should not show a balance. A card that shows a lower limit than you actually have can make your balances look high relative to your available credit.

Payment history

Look for late payments you believe were made on time, and check the dates of any real ones. Most negative information can stay on a report for about seven years, and some bankruptcies for up to ten. Accurate negative information cannot be removed early just because you ask, but inaccurate information should be corrected.

Collections and duplicates

A single debt sometimes appears twice: once under the original creditor and again under a collection agency, with both showing a balance. Only one of them should show an amount owed.

Inquiries

Hard inquiries appear when you apply for credit. An inquiry from a company you never contacted is worth following up.

How to dispute an error

1. Gather your proof. Find statements, payment confirmations or letters that show the information is wrong.
2. Contact the credit bureau that shows the error, online or by mail. Explain what is wrong and why, ask for it to be corrected or removed, and include copies of your proof, never originals.
3. Contact the company that supplied the information, such as the lender or collector, and dispute it with them directly as well.
4. Keep records. Save confirmation numbers, dates and copies of everything you send.

Credit bureaus generally have 30 days to investigate a dispute, sometimes a little longer, and must tell you the results. If an item is corrected, you can ask the bureau to send notice of the correction to anyone who received your report in the past six months. If you disagree with the outcome, you can add a brief statement to your file or submit a complaint to the Consumer Financial Protection Bureau.

Freezes and fraud alerts

A credit freeze restricts access to your credit report, which makes it harder for someone to open new accounts in your name. Placing and lifting a freeze is free at each bureau. If you have a freeze in place, remember to lift it temporarily before a lender checks your credit.

A fraud alert is lighter. It asks businesses to take extra steps to verify your identity before opening credit. An initial alert lasts one year, and placing it with one bureau means that bureau notifies the other two.

Closing out week one

Finish the week with a short summary in your homebuying folder: what you found, what you disputed and when, and your current credit card balances compared with their limits.

If your reports are clean, the best thing you can do for the rest of the month is keep paying every bill on time and avoid applying for new credit. If you carry high card balances, paying them down can help. Avoid closing older accounts just to tidy up, though, since that reduces your available credit and can shorten your credit history.