Like it or not, you are being judged. You might not even be aware of their existence, but there are three major credit bureaus that have been tracking your credit history. They use that history to create a numerical score (your FICO score). Based on this score, lenders will decide whether or not to lend to you, and at what interest rate. Employers may use your score and history to predict if you would be a reliable employee, or a security risk (take note, all yea looking for a security clearance!). And now more than ever, landlords are examining credit reports to see if you’re likely to be a reliable tenant. A lot is riding on one’s credit score, a fact made all the more galling because the actual formula for creating the score is not public.
But, it is what it is. The first step in taking control is to get your credit histories. Once a year, you can get a free copy of your credit history from each of the three bureaus. Use this site – http://www.annualcreditreport.com. It is the ONLY site that is specifically sanctioned by the U.S. government to give your free histories each year.
Once you get your three reports, carefully read through them and make sure you recognize everything. Is there any incorrect information? Have you had credit that’s not reported on the form? Is there an error? If so, REPORT it to the bureau! You can often do this online at the respective sites (Equifax, Experian, TransUnion). Do NOT be shy about fixing errors!
If you have negative marks on your report, contest them with the creditor. If that doesn’t work, dispute them with the credit bureau. For legitimate errors, you should always be able get them taken off eventually. Even negatives that are your fault, like late credit card payments, can sometimes be removed. You can ask the creditor to remove the mark as a courtesy. At Community Ladders, we’ve been successful in roughly 2/3 of our attempts to get these negatives erased simply as a courtesy. So, it is definitely worth giving it a shot!
This blog entry is part of our June newsletter offering advice to recent graduates.
Bill Varettoni is a financial planner and the founder of Community Ladders.