Credit Tips From The National Association of Consumer Advocates
The National Association of Consumer Advocates has written a five-step guide to improving your credit score. The guide rather useful, in particular because it defines terms and notations used on your credit report. It also describes what your credit report really is--a document generated on request that pulls data from a massive pool of consumer information. Quite simply, your report doesn't exist on paper until it is pulled. Then, an algorithm queries a database and pulls all of the data that is supposed to be associated with your personally identifiable information.
This system naturally leads to some false positives. These false positives can display on your credit report. If they are negative accounts, then they can adversely affect your credit. You want your report to be 100% accurate because it is used for more than just issuing credit. Although some states are moving to eliminate the practice, some employers pull your credit. If you want to rent an apartment or house, your credit may be pulled.
While the NACA article is well-written and contains lots of great advice and explanations of how credit reporting works, it does miss some very important points.
1. How to submit a dispute.
NACA is correct; you should always dispute errors in writing. However, NACA misses an important point: you should always include as much supporting documentation for your dispute as possible. Was your debt discharged in bankruptcy? You need to include your discharge order, the list of who received that order, and the schedule from your bankruptcy petition that lists the creditor. This way, if the report is not corrected, you can easily build a case against the creditor, the reporting agency, or both.
The tendency is that these agencies don't do the required legwork. Don't give them an excuse to label your dispute as frivolous or incomplete. More information is always better here.
2. Don't close accounts
NACA does not touch on this point. Many people have a tendency to eliminate old credit card accounts that they don't use. This can be a bad idea. Part of your credit score is based on your debt load and credit utilitzation. It depends who you ask, but keeping your debt load at 20-30% of your total available credit can vastly improve your score.
While paying off a card and closing it out may feel good, it can also hurt your score. Closing the account lowers your total available credit. If the ratio of use to available credit changes too much, that 20% figure could jump to 40% and hurt your score.
3. Follow up on both sides of the coin.
NACA alludes to this, but it cannot be restated enough: send your dispute to both the reporting agency and the creditor. If the creditor is doing things right and it's the agency that's the problem, contacting the creditor can often help resolve the problem. If it doesn't, then information gained from the creditor may be useful in pursuing a lawsuit against the reporting agency.
4. Don't be afraid to sue.
Credit reporting agencies won't improve their processes and procedures until we force them to do so. While the credit reporting agencies will fight tooth and nail to avoid judgements being entered against them, they won't get improve until it is cost-effective to do so. Given that these companies have deep pockets and funds set aside for settling lawsuits, it'll take a lot of settlements and jury awards to make it happen. That process begins with you.