Fixing Credit Report Errors

A consumer who has been turned down for credit because of the information in his credit report is entitled to receive a free copy of that report within 60 days of the denial. Until recently, most other consumers had to pay a fee to receive copies of their credit reports.

It literally took an act of Congress but, thanks to legislation that took effect in 2005, consumers nationwide can now get one free copy of their credit report each year. Go to AnnualCreditReport.com for instructions about ordering the free credit reports to which you're entitled.

After receiving your credit reports, follow the directions in each report, and contact the appropriate agencies to have errors corrected. The credit bureaus are legally required to investigate disputed information and to remove anything that is incorrect.

It isn't necessary to delay applying for a mortgage while errors in a credit report are being corrected (though it may be necessary to hold off on making a purchase offer until a loan pre-approval is received). Speak candidly with your mortgage broker or loan officer at the earliest opportunity and explain any discrepancies and how they occurred, if known. Follow the loan professional's advice. You may need to provide a written explanation for the lender.

The Federal Trade Commission cautions consumers to be wary of companies that make claims regarding credit repair. These companies, commonly called credit clinics, don't do anything for consumers that consumers can't do for themselves at little or no cost.

Beware of any organization that offers to create a new identity and credit file for you. The FTC and state attorneys general have filed actions against persons and companies that pursue this fraudulent practice. Here are some warning signs that the FTC and others say consumers should look out for to determine if they might be dealing with a credit clinic:

• An organization that guarantees to remove late payments, bankruptcies, or similar information from a credit report;
• An organization that charges a lot of money to repair credit;
• A company that asks the consumer to write to the credit reporting company and repeatedly seek verification of the same credit account information in the file, month after month, even though the information has been determined to be correct;
• An organization that is reluctant to give out its address;
• An organization that tries to talk a person into making a decision immediately.

For more information about credit clinics, write to the Federal Trade Commission, Sixth and Pennsylvania Avenues NW, Washington, DC 20004 to request a brochure entitled "Credit Repair: Self Help May Be Best."