If you’re heading into a big financial change like buying a house or a car—or even considering a new credit card or lease—it might be suggested that you clean up your credit reports. But what does that mean? And what are the steps that can be taken?
Your credit score tells a lender or business owner about your “creditworthiness.” In other words, it can be used to gauge how likely you are to pay your bills, your ability to pay them on time, and how much debt versus available credit you have. The tricky thing is that you may have three separate scores at any given time because they’re based on credit reports from the three major credit bureaus: Equifax, Experian and TransUnion. Read more about your credit scores and how they’re created here.
As we often say, it’s critical to access your credit reports periodically and to “clean up” any messes you see. Your goal is to raise your credit score as high as possible.
“You won’t be able to remove negative information in your credit reports that are accurate,” states Experian. “But deleting accounts you didn’t open or disputing a late payment you believe was paid on time, for example, could help protect your credit score.”
Typically, you can check your credit reports for free annually. As of April 2022, however, Equifax, Experian, and TransUnion continued to offer free weekly online credit reports because of the COVID-19 pandemic. It’s vital to take advantage of these free opportunities to check your credit and ensure that the picture these reports paint is correct and up-to-date. An easy way to access all three is through the website Annualcreditreport.com.
These reports can be overwhelmingly long and hard to review, but don’t let that stop you. Your credit is too important. The Consumer Financial Protection Bureau (CFPB) offers a checklist of errors to look for, which include:
Identity errors include a wrong name, phone number, or address but also the addition of accounts you don’t recognize. These accounts could belong to another person with a similar name, or they could signify that your identity has been stolen.
Incorrect reporting includes being listed as the owner of an account when you’re only an authorized user or accounts that are incorrectly reported as late or delinquent.·
Data management errors include accounts listed multiple times with different creditors (which can occur when accounts are placed in collections).
Balance errors include incorrect monetary balances or credit limits on credit cards, loans, or other accounts.
Don’t overlook seemingly minor errors like an alias that doesn’t match a name you’ve ever gone by or an address where you’ve never lived. Each credit reporting company explains how to dispute errors in the reports themselves and on their websites.
And if the blemish on a credit report isn’t an error? Take these steps to beef up your credit score, including transferring credit card debt to a lower interest rate card. And don’t forget that your banking activity also matters. Checking and savings account activity doesn’t appear on your credit reports, but it can be reported and shared similarly. Therefore, bouncing checks, ignoring loan payments, and other behaviors hold consequences.
If you have concerns or questions about how your credit reports may affect your financial freedom, contact CPS IBEW FCU today.
