Know Your Credit Report; Know Your Financial Destiny

By Attorney Nemia L. Schulte

QUESTION: I just received a copy of my credit report and I noticed that there were some entries that were either incorrect or did not belong to me. How important is my credit report? How do I clear up my credit report?

ANSWER: Surprisingly, many people have either negative or derogatory entries in their credit reports, or worse, have entries regarding accounts that do not belong to them. Unfortunately, most people do not realize this until they are turned down or denied for credit primarily due to these negative entries.

Your credit report is very important because it may serve to guide your financial destiny. When deciding to extend credit to an applicant, most creditors rely on reports from one of (and sometimes, from all of) the three major credit reporting bureaus - Experian (formerly TRW), TransUnion and Equifax. These three bureaus provide you with a credit "score" or "rating" depending on numerous factors such as the number of times you were late on payments, the total amounts of outstanding debts, whether any of these debts have been charged off or sent to collection, the length of time you have established credit, etc.

Lenders, specifically mortgage companies and automobile finance companies, focus on these ratings and score when determining whether to extend you credit, and if so, the interest rate of your loan. Moreover, even some employers, such as banks, police and fire departments, department stores, etc. rely on these credit reports when deciding whether to hire a prospective employee. Unfortunately, most people do not realize how important their credit report can be with respect to their financial situation and even prospective employment, until it is too late.

In order to correct your report, there are certain steps you must take. First, you should contact each of these three credit-reporting bureaus to obtain a copy of your report. (You never know which of the three credit reporting bureaus your potential creditor or employer will rely on.) You can order credit reports in wrting, by phone or online. Click on each agency name for more information: Equifax, Experian and Trans Union.

The credit report is free - if you have been denied credit. It can take within a couple of days to several weeks before the credit reporting bureaus send you a copy of your credit report.

Second, you should review each entry on each report to determine whether there are any "negative" remarks. For example, a negative or derogatory remark can include the following: a statement that you were 30, 60, 90 or even 120 days late on a payment and the number of times you were late; a statement that the creditor "charged off" your account or sent it to a collections agency; or a statement that that your account was closed by the creditor. Also, if you notice a lot of "R9s" in your report, these are negative remarks because they indicate that your account was charged off or forwarded to collections.

Third, if any of the entries are incorrect, or worse, are regarding accounts that you do not recognize, then you should write to each credit reporting bureau that reports a negative entry, and dispute such entry. You can state that the entry is wrong because you were never late, or that the account does not belong to you, or that the account had been paid off. Once the credit reporting bureaus receive your dispute letter, they are required by law to investigate your dispute. They must contact each creditor whose entry you dispute to determine the validity of your claim. This process generally takes about 30 days. The creditor either verifies the report or, if you are lucky, does not respond to the investigation. If the creditor does not respond or cannot provide documented proof that the entry is correct, then the credit reporting bureau must delete this entry from your report. If the creditor verifies the disputed entry, then the credit-reporting bureau will notify you.

If you still dispute the entry, you are then allowed to provide the credit-reporting bureau a statement of up to 100 words to explain your dispute. Your explanation will then be included in your credit report for future creditors to review and consider.

If you decide to settle or clear up some entries which have been verified, you should then contact the creditor directly and attempt to settle the account in exchange for a "neutral" entry, such as an entry that provides "settled, account balance is $0.00." Generally, a creditor is eager to settle a "charge off" account for as little as 50% of the original amount. However, there are occasions when it may be to your benefit to hire an attorney to help you settle your account with a stubborn creditor.

Finally, be wary of paying any companies out there who "guarantee" to clear up your credit report. For the most part, they are playing a numbers game with the credit reporting bureaus. In other words, they hope that the creditors do not respond to the bureaus' investigation, thereby forcing the bureaus to delete the disputed entries. Nothing, except death and taxes, is guaranteed in life, and you may just be throwing away your money instead of using it to settle your debts with the creditors.

Attorney Nemia L. Schulte practices in Pompano Beach, Fla. Visit her Web site at