How to Add an Explanation to a Credit Report

Under the Fair Credit Reporting Act, you have the right to report any discrepancies on your credit report by submitting a letter of explanation to each of the credit bureaus. While doing so won't improve your credit score, it will give you peace of mind.

Instructions

1

Request a free credit report for each of the three credit bureaus at Annual Credit Report online, by phone (1-800-322-8228) or by mail. Review and take note of any discrepancies.

2

Visit the website of the credit bureau that is reporting the discrepancy. If all three bureaus have the information that you would like to dispute or add an explanation to, you will need to contact all three.

3

Visit the credit bureau's website (see References) and elect to dispute the discrepancy online (using the report number at the top of your credit report), by mail or by phone. Each bureau has detailed instructions on how to file your dispute online. After you have submitted the dispute, the bureau will begin an investigation.

4

If the credit bureau determines that the dispute is valid, take no further action. It will remove the discrepancy from your file. If it verifies that the dispute is not valid, prepare to submit an explanation.

5

Write your explanation in 100 words or less and mail it to the appropriate credit bureau. Include a reason for the discrepancy (was laid off, didn't understand responsibility, first credit card), and reasons why you are now creditworthy (new job, more responsible). Be sure to claim ownership for the discrepancy. For Equifax, mail your explanation to Equifax Information Services, LLC, P.O. Box 740256, Atlanta, GA 30374. For TransUnion, mail to TransUnion Consumer Solutions at P.O. Box 2000, Chester, PA 19022-2000. For Experian, mail to Experian, PO Box 9532, Allen, TX 75013

6

Verify that your explanation has been accepted and attached to your credit report.

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How Long Do Bad Things Stay on Your Credit Score?

Your credit score is a number used by lenders to determine the credit risk you present. A high credit score increases your chances of approval and improves your chances of receiving a lower interest rate on loans. Credit scores are determined based on information from your credit report, including payment history, public records (such as bankruptcy) and inquiries into your credit report. While positive information may remain on your report forever, negative information often may be removed.

Permanent Information

Criminal convictions may be reported on your credit report and remain there permanently. Any credit information reported as a result of application for employment with more than a $75,000 per year salary or an application for credit or life insurance valued at $150,000 or more may also remain on your report and affect your score indefinitely.

Bankruptcy

Bankruptcy remains on your credit report for 10 years after filing. Although accounts will show they were discharged or included in bankruptcy, check your credit report to ensure the account balance has been changed to $0 following bankruptcy and that the creditor is not still reporting late payments on the account.

Late Payments and Other Negative Information

Other negative information remains on your credit report for seven years. This includes late payments, charge-offs, defaulted student loans, judgments and tax liens. According to Bankrate, if the tax lien is unpaid, it can remain on your report for up to 15 years.

Other Negative Information

Other items on your credit report that may negatively affect your credit score include having a high debt-to-credit ratio (carrying a large amount of debt relative to your credit limit) and late payments. Paying down debt and having more available credit will help to raise your score. Although late payments will remain on your report for seven years, getting current on any past due accounts will immediately improve your score.

Disputes

Dispute any information on your credit report that is inaccurate or does not belong to you. In addition, dispute any items not removed from your credit report after the time limit has been reached. Creditors do not necessarily report information to all three credit bureaus -- Experian, Equifax and TransUnion -- so check all three of your reports to ensure that all three reports are accurate and all three credit scores are a high as possible. You can obtain a free copy of your credit reports once each year through AnnualCreditReport.com.

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Debit Cards & Credit Ratings

Many checking accounts come with a debit card. Debit cards look and spend like credit cards, but the comparison ends there. A debit card does not have the same effect on your credit history or credit rating. In fact, it may never affect your rating at all if you watch your spending.

Basic Use

Debit cards allow you to make purchases using the funds in your checking account without having to write checks. A debit card carries a MasterCard or Visa logo. You can swipe your debit card through any point-of-sale machine or use it online. When you make a purchase, the funds are withdrawn automatically from your checking account. Most banks allow you to use your debt card free of charge. However, you can accrue fees by spending more money than you have available in your account. Doing so will result in an overdraft charge.

Typical Credit Rating Effect

Banks do not typically report the day-to-day activity on your debit card to the credit bureaus. If you manage your debit card responsibly, it will not appear on your credit report. However, if you overdraw your account, the bank will not report it to the credit bureaus as long as you remedy the situation quickly by paying any fees you owe to the bank. Since daily activity does not appear on your credit report, a debit card will not help raise your credit rating.

Charge-Offs

If you allow your checking account to go into overdraft status and do not pay off the negative balance, the bank will eventually close your checking account. When the bank closes your checking account, it will write off your debt as a charge-off. Bankrate.com reports that lenders typically write off accounts as a charge-off after 120 to 180 days of nonpayment. The bank is then likely to sell your account to a collection agency. Both the charge-off and the collection file will appear on your credit report, leaving a negative mark, which will lower your credit rating.

Considerations

Avoid going over your available balance by tracking your spending. You can monitor the funds in your checking account online with most banks. You can also use your check register to keep track of debit-card purchases. Steering clear of overdrafts will save you money. If you do overdraw your account, pay the negative balance immediately. You cannot remove a charge-off account from your credit report once the bank adds the information.

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Do Credit Card Companies Really Investigate a Disputed Charge?

If you're faithfully monitoring your credit reports, you may find some inaccurate information has been reported to the Big Three. You can always file dispute forms with the major credit bureaus, but you might be wondering whether you should bother. Will it make any difference? You might be surprised.

Disputing Information

Each of the three major credit bureaus provides a form you can either file online or by mail to dispute any information listed on your credit report. Once you submit the form, the credit reporting company has 30 days to investigate the disputed information.

Effects

Credit reporting bureaus are quite busy and may not have the time to investigate disputed information. Should the time pass without an investigation taking place, the bureau is required to delete the negative information. This is a great advantage for you, but don't get too excited. The creditor who reported the negative information can always report it again, and you'll be back at square one.

Warning

One of the most maddening things about the credit reporting industry is that the credit reporting company will always take the word of the creditor over the word of the consumer. So if the reported information is inaccurate (or even a flat-out lie), whatever the creditor tells the bureau is what will appear on your credit report. Your only options are to keep disputing the information or sue the creditor. Since creditors have much deeper pockets than most consumers, filing a lawsuit against them is out of the reach of most of us.

Considerations

Negative information may remain on your credit report for seven years. Bankruptcies may remain on your report for 10 years. Each of the three major credit reporting agencies is a separate entity, so disputed information removed from one report does not mean that information will be removed from all three. You must file a dispute form with each bureau.

Significance

Having an accurate credit score is becoming more and more important now that companies other than those offering credit are relying on credit scores to make decisions about consumers. For example, car insurance companies charge consumers with lower credit scores more money for coverage and potential employers can refuse employment to consumers with lower credit scores. These discriminatory practices are currently legal, and until legislation takes place to prohibit such behavior, all a consumer can do is continue to monitor his credit reports and dispute inaccurate information.

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How to Raise My Credit Score to 800

Your personal credit score affects how much credit you can get, the type of credit and the interest rate. The higher your credit score, the more confident you can be when you need to apply for credit. Checking your credit score regularly is important. This measure will indicate where improvements are needed and will help you raise your score. You can raise your credit score to 800 over a period of time by following certain guidelines.

Instructions

1

Obtain your credit score from MyFICO. This will provide a starting point to help raise your credit score. The FICO (Fair Isaacs Corp.) score is the one most lenders use to assess your suitability for credit. It compiles data from the three main credit reference agencies: Equifax, TransUnion and Experian. Click the link in the resources section. You will find three options: check it, compare it and track it. The cost varies for each option. Make your choice and click "buy now" then create your account and complete the application form. Click "continue" to view the customer agreement form. Follow the instructions and enter your payment details. Your identity will be verified and login details will be given. Create a password and your credit score will be available.

2

Carefully check your credit score. Understand how your score is calculated as this will assist you in ways to raise your credit score. (See resources.) Correct any errors by contacting the lender and the credit reference agency. This will raise your credit score. (The link is in the resources section.) Check areas where your score is lowest. It may be that you have not used a card for some time and so it is considered inactive. Using a credit card wisely and regularly increases your score.

3

Apply for credit only when you need it. Too many applications reduce your credit score. A maximum of two or three applications a year is best. Maintain a maximum of four or five credit cards. More can negatively affect your credit score but having only one will keep your credit score low. Use your cards regularly and maintain a balance of less than 40 percent of your credit limit.

4

Make sure all bills and credit card payments are made by the due date. You will need to have at least six to seven years of up-to-date payments to raise your credit score above the average of 600. Maintain a credit balance in your checking account.

5

Maintain credit over many years; 20 years or more is best. This will show that you are responsible and can be trusted with credit and will assist in raising your credit score, over time, to 800.

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What Information Is Given Out on a Credit Check?

Credit checks are usually performed by lenders before issuing you a loan or line of credit such as a home equity line of credit or credit card. Lenders usually request your credit history from one of the three main credit bureaus: Equifax, Experian or TransUnion. The information on your credit report is provided by creditors from around the country.

Identification

Basic identifying information such as your name, home address, birthday, Social Security number and employment history are part of your report. However, they do not affect your credit score. Lenders may use this information to determine how stable your employment situation is or to verify your income.

Payment History

Your credit report will include information about credit accounts that you have had including credit cards, auto loans and mortgages. Each account will show how long you have had the account, the credit limit of the account and will note whether your payment was on time or late each month as well as if the account is delinquent. If you have declared bankruptcy or defaulted on any loans, that information will also be on your report.

Inquiries

Each time you apply for a new loan or line of credit, an inquiry is noted on your credit report. These inquires remain on your report for two years.

Permission

You must grant permission for anyone to conduct a credit check. Usually your loan application will include you giving permission for the financial institution to conduct a credit check. Even though a company may require you to undergo a credit check, the employer must still have your signature authorizing the credit check.

Differences for Potential Employers

Some companies will require that you submit to a credit check as part of the application process. This is more common in jobs that require dealing with proprietary information that an employee could be bribed to give out or jobs that require employees to handle large sums of money that employees with debt issues may be tempted to embezzle. The report that the companies get differs from the report lenders get in only two ways: your birthday is not included to prevent age discrimination and your credit score is not included.

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How to Raise Your Credit Score by 100 Points

Credit markets have tightened considerably with the nuclear meltdown of our financial markets. What cash is still available for borrowing will be harder than ever to obtain. Your credit score will definitely affect whether or not you get the loan you need, or at the very least will affect the interest rate you'll get. Plan ahead. Begin working now on credit repair. The process can take a few months.

Instructions

1




Know your credit score and what the negatives are. Shoot for a score above 700. If your score is above 700 you probably don't need to invest a lot of time and money to get your score higher. Check with your lender though. The changing financial landscape may have affected this long-standing rule of thumb.

2

Contact the credit reporting agency (Transunion, Experian, or Equifax) about any obvious errors. The Federal Trade Commission suggests contact the agency in writing. Explain what you think the error is, and include copies (not originals) of documentation that would support your position. The agency is required to look into your claim. The agency must report their results to you in writing. If their investigation results in a change to your credit report, they must also provide a free copy of your revised credit report.

3

Find a reputable credit repair company. Certainly there are bad companies that charge hundreds or even thousands of dollars that produce little or no results. But there are reputable credit repair companies. I was referred to Lexington Law by my mortgage broker. Lexington Law was around $59 per month, and an additional $13/mo for Identity Guard, a service which makes available your credit report from all three reporting agencies. With their help my score went up more than 100 points in about six months. You can try to go it on your own, but the working with a credit repair company will keep you disciplined about your credit repair efforts. In addition, a good credit repair company just might have more clout with the companies who have dinged your credit than you will.

4

Keep your nose clean. There is no sense in putting a lot of effort into credit repair unless you're willing (and able) to change the practices that got you there. A) Pay your bills on time, maybe by using your banks automatic bill pay that you manage over the Internet. B) Use under 50 % of your credit line on each account. Creditors want to know that you won't be tapping out your borrowing power anytime soon. C) Minimize the number of people checking your credit. A lot of hits by companies checking your credit could indicate that you're planning on opening a number of accounts.

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