What is a Good FICO Score in This Economy?

Reader Question: I have heard that the "rules" about credit scores and home buying have changed because of the economic crisis. What is a good FICO score to have these days, if I want to apply for a mortgage loan and buy a home?

For the benefit of all readers, let me start by explaining some terminology. FICO stands for Fair Isaac Corporation, a company that does data analysis and "decision management" stuff. They created the FICO scoring model that is used to convert your credit report into a score.

This scoring system is used by Experian, one of the credit-reporting companies in the United States. There are two other companies who generate consumer credit reports -- Equifax and TransUnion. They each use a different scoring model to convert their reports into scores.

Actually, while writing this response to your question about good FICO scores, I checked out the websites of these companies to get some updated information. It seems that Equifax is now using the FICO system is well, but TransUnion is not. It can be a bit confusing, but don't worry ... here's what you really need to know:

When you hear somebody refer to a good FICO score they are talking about the score produced through the scoring model we just discussed. There are other types of scores generated through different systems (like the one you could get through TransUnion), but the FICO score is the one most commonly used by mortgage lenders. Most lenders will also consider one or both of the other scores as well. This is also why you will see offers for a "3-in-1" credit reports and scores -- you are being offered access to all three of your reports and scores.

Having a good FICO score will help you qualify for a home loan, because it's the number most commonly used by mortgage lenders in the U.S. And this brings us up to the question you started with -- What is a good FICO score in the current economy?

It's true the definition of "good" has risen because of our economic crisis. You need a higher score these days if you want to qualify for the best interest rates on a mortgage. The FICO range goes from 300 to 850. I define a good credit score as one that allows you to (A) qualify for a mortgage loan and (B) get a decent interest rate on that loan.

There's a lot of flux in the mortgage industry right now (for obvious reasons, so it's hard for me to say where the qualification standard lies. But I can give you some insight into the score needed to get the best rates on your loan...

A couple of years ago, you probably could have qualified for the lowest interest rates on a mortgage loan with a FICO score of 650 or above. Today, however, that is no longer the case. In the current economy [and who knows what will happen six months from now], you would probably need a FICO score above 750 to qualify for the best rates on a loan.

Sure, you can probably get approved for a loan with a score between 650 and 750 right now, but you won't get the lowest rates. That means you'll be paying a bigger mortgage payment each month. So if you can boost yourself up above 750 before applying for a mortgage, you'll be in much better shape.

So what is a good FICO score in the current economy? I would say a 700 or above is a pretty good score and should allow you to get financing for a home. A 720 or above is even better. And if you can clear the 750 FICO range you'll be in great shape because you'll qualify for the best interest rates the mortgage lender has to offer.

Related articles:

• Is 700 a good credit score in this economy?
• How long does it take to improve a score?
• View all blog posts on this topic
  

How Long Does It Take to Improve a Credit Score Significantly?

Reader Question: I have bad credit and want to improve it before trying to buy a home next year. How long does it take to improve a credit score significantly?

It takes five months, two weeks and three days. And it usually happens at midnight when there's a full moon. Just kidding. It's a dry subject, so I have to humor myself once in a while. Let's get serious here...

How long it takes to improve a credit score will depend, in part, on how actively you are trying to improve your score. It also depends on the cause(s) of the credit problem. Because of these and other variables, it's hard to put an exact time frame on it.

With that said, I will say that you can make significant improvements within a matter of months -- if you are proactive about improving your score.

Of course, in order to be proactive about this, you must first understand the primary factors that influence your score. Then you can focus your energy on the things that will help you improve your credit score as quickly as possible.

In truth, there are dozens of individual factors that influence your score. But in this article, I'll focus on the things that will have the biggest effect in the least amount of time. How long it takes will still vary from one person to the next. But you can certainly expedite the process by focusing on the following:

1. Your history of bill payments.

By most estimates I've seen, your history of making payments can account for 35% of your score. So if you have a habit of neglecting car payments, credit card payments and the like, you need to correct that behavior immediately.

2. Your credit card balances.

This is another factor that influences your overall score. Having one or two credit card balances is not necessarily an issue. But if you have a lot of cards, or if you're nearly maxed out on one or more credit card, it can lower your score. The solution is to work out a budget that allows you to gradually reduce those balances, starting with the ones that are near their limits.

3. The length of your credit history.

There's nothing you can do to lengthen your credit history. But without realizing it, you could shorten your history. This in turn could lower your score. That's why you have to be careful when closing old accounts. In most cases, it's best to keep your oldest accounts open, even if you reduce the balance considerably. When you close your oldest account -- such as your first credit card from when you turned 18 -- you are in essence shortening your credit history.

Closing unused accounts, or those that have low balances, is a good practice that can help you prevent identity theft. But you have to be careful not to close the oldest one. If you close anything, start with the newest accounts. Or better yet, keep the accounts open but pay the balances down as much as possible. This will show a long history of good debt management, and that's what lenders want to see.

Conclusion and Going Forward

How long does it take to improve a score significantly? As mentioned earlier, the process and time frame will vary from one person to another. But you can expedite the process by first understanding how your credit score is calculated, and then by focusing your energy on the things that will have the biggest effect.

If you pay all of your bills on time, reduce your credit card balances, close your old and unused accounts (but not the oldest one) ... you will be on the road to improvement. You could even see a significant change in your score within a few months. Only time will tell.

I know that's not the definitive answer you were looking for, as to how long it takes to see results. But it's the best answer I can give you. Good luck.

Related articles:

• How long does bad credit last?
• How to clear up a bad history

How Long Does Bad Credit Last On Your Report?

Reader Question: How long does bad credit last and what can I do to get rid of it?

As with most credit-related questions, there are many layers to this one. So we should peel the layers one at a time. Let's start with the basics and build from there.

For the benefit of all readers, let me clarify something. When somebody asks how long bad credit lasts (and we get this question a lot), what they usually mean is this: "How long does negative information stay on a credit report?" These reports are used to create your credit score, which lenders will use when considering you for a loan. So both of these things -- your reports and scores -- are important to consumers in general, and home buyers in particular.

Depending on what it is, negative information can stay on your credit report for seven to ten years. There are federal laws that regulate all of this, and if you ever have trouble sleeping at night you can delve into the Fair Credit Reporting Act. It will put you to sleep in short order!

Let me just paraphrase some of the relevant parts of the act. According to section 605, paragraph 'A' of that law:

• A bankruptcy filing must come off after 10 years.
• Civil suits and judgments must come off after 7 years.
• Accounts placed for collection (because of missed payments) must come off after 7 years.
• For all other adverse items on a credit report, the 7-year rule applies.

To sum this all up, a bankruptcy can stay on your credit report for up to 10 years. Most other negative items (such as past-due bills) can stay on there for up to 7 years. Of course, it's possible for these items to last longer than the law allows, which is why it's important to review your reports once a year to make sure items "disappear" when they are supposed to. If not, you will have to send a dispute letter along with any supporting documents to the credit-reporting agency who produced the erroneous report.

When you ask how long bad credit lasts you must also realize that it's all based on your financial behavior. In other words, the information contained in your credit reports is fueled by your day-to-day financial activity. So if you continue to do the things that led to the credit problems in the first place (such as neglecting your bill payments), then your bad credit may last indefinitely.

On the other hand, if you change your financial behavior for the better, the negative information will come off your reports after a few years, and your score will steadily rise at the same time. In fact, you can actually improve your credit rating even while the negative information stays on your reports ... just by being more responsible with your finances.

Free Yearly Credit Report - Is It Really Free?

Reader Question: I have read that I am entitled to a free yearly credit report from the companies who produce them. But I've also seen a lot of people charging for this stuff. Who produces these reports, and who do I contact to get a yearly credit report that is truly free?

You're not alone with this question. You'd be surprised by how often people ask about this. In fact, we just answered a nearly identical question about a week ago, so I recommend reading that one as well.

In the previous Q&A session (hyperlinked above), I explained why some websites offer free credit reports but then charge for add-on services. So in this response, let me focus on the core question you are asking -- who produces these reports and where you can go to get your free yearly credit reports online:

There are three credit-reporting companies in the United States. They are TransUnion, Equifax and Experian (formerly known as TRW). The Fair Credit Reporting Act (FCRA) is a federal law that governs the way consumer data can be gathered and distributed. In 2003, the law was updated with some new provisions. One of the items added under section 612 was the following clause about free yearly credit reports for consumers:

All consumer reporting agencies ... shall make all disclosures pursuant to section 609 once during any 12-month period upon request of the consumer and without charge to the consumer.

Or, to state it in plain English, consumers have the right to request their credit information once a year without being charged for it.

The revised law also called for a "centralized source" where consumers can go to request their free yearly credit reports -- and that source is the website located at www.AnnualCreditReport.com. The website is incredibly easy to use, so you should have no trouble finding your way through it. From the home page, just look for the button right in the middle that says "Request Report" or "Start Here."


Image: Where to get your annual credit report for no charge.

If you would rather request your free yearly report by mail, you can do that as well. A mailing address is provided on the website mentioned above. Now let's move on to another important question that piggybacks on this one...

What to Do With Your Yearly Reports

The first thing you need to realize is that your reports will not come with a credit score. That's a separate thing entirely, which confuses a lot of people. I have yet to find a website where you could get your credit score for free without making a purchase of some kind. But there are some legitimate websites where you can all of this information at once (reports, scores and more). We have listed a few of those on the tools page. Your score is another important piece of the puzzle, because that's what lenders will use when considering you for a loan.

But let's get back to the free yearly credit reports and what you should look for when you receive them. Basically, you are looking for any kind of errors or inaccuracies. Such mistakes could affect your score in a negative way, and they could also be a sign of fraud. For example, if you see a line of credit that's not yours (like a credit card or a loan), then it's one of two things -- an innocent data mix-up, or a case of identity theft. Either way, it's something you need to resolve. Here's some information on how to dispute such errors.

Of course, the only way you can spot these things is by being proactive. So if you haven't yet done so, request copies of your free yearly reports through the website mentioned earlier.

I hope this answers your question, and I wish you financial success in your life.

How to Repair Credit After Bankruptcy

Reader Question: My husband and I had to file bankruptcy last year. We know it will hurt our credit but we're hoping we can buy a home again in the near future. What are the steps to repair credit after a bankruptcy filing? Where should we start?

I'm sorry to hear about the bankruptcy situation. At the same time, I'm happy to tell you it's not the end of the world, financially speaking. Yes, it is certainly possible to repair your credit after such an event. It just takes time. In fact, whenever I answer this kind of question, I like to use the phrase "time and good behavior" to describe the way forward.

Let's talk about the first part of my little mantra -- the time factor. The Fair Credit Reporting Act establishes certain guidelines that the three credit-reporting companies (Equifax, Experian and TransUnion) must follow. One of these guidelines has to do with bankruptcies. By law, a bankruptcy cannot stay on your credit report more than ten years.

Of course, this is both good and bad depending on how you look at it. The downside is that a bankruptcy could stay on your record for up to a decade, so it will be noticeable to any lender who reviews your credit history. The upside is that it can't follow you for ever.

This is where the "time and good behavior" mantra comes back into the picture. The effects of a bankruptcy will fade with time. And even while it does follow you, you can still work to repair your credit after a bankruptcy filing. You can do this by being financially responsible -- by paying all of your bills on time, by reducing your debt, by closing old accounts. Over time, this shows a potential lender that your past financial misfortune was an isolated event, and that you've demonstrated your financial responsibility since that time. On the other hand, if the filing was just one of a long series of financial misfortunes and irresponsible actions, then it suggests a dangerous pattern to lenders.

So to sum up...

Yes, you can repair your credit rating after a bankruptcy event. Experian, TransUnion and Equifax can report bankruptcies for up to ten years, but no longer. In the meantime, you can "lessen the blow" by establishing a pattern of financial responsibility and diligence.

Related information:
Buying a Home After Bankruptcy

I hope this answers your question, and I wish you luck in your future home-buying process. I hope it all works out for you.

How to Clear Up a Bad Credit History

Reader Question: I want to purchase a home sometime during the next year, and I want to clear up my bad credit history first? What should I start with when clearing up my credit?

While we are on the "clear" subject, I'd like to start by clearing up some of the terminology here (for the benefit of all readers). When people talk about their credit history they may be referring to one of two things:

1. The financial decisions and actions they have made over the years.

2. The way this financial activity is being reported, in the form of credit reports.

Item #1 leads to item #2. So both of these things must be considered when discussing the subject of how to clear up a bad credit history. Furthermore, item #2 (your credit reports) are used to compute your credit scores, and lenders use these when considering you for a loan.

Obviously, we cannot erase our financial past. But we can certainly correct the behavior that led to bad credit in the first place. For example, let's say that in the past I had a bad habit of neglecting my bills. I have missed payments for my credit cards, my car loan, and other bills for a period of several months. By law, this negative information can stay on my credit report for up to seven years.

Now let's assume I've become more responsible with my bill payments. It's four years later, and I am planning to buy a home. I want to clear up my bad credit history so I'll have a better chance of getting a mortgage loan. What can I do?

• I cannot change the past, so my delinquent payment situation will still be on my credit report (for a few more years anyway).
• If my financial behavior has improved since then, and I haven't had any delinquent payments in several years, my credit report will reflect this as well.
• It's still wise for me to request copies of my credit reports and clear up any errors that might be on there. These will only hurt my cause.
• Most importantly, I should continue to pay all of my bills on time and make sure I don't rack up too much debt. Over time, this kind of good financial behavior will improve my credit score.

That last item on the list is the most important of all. Even if you have some negative information on your credit reports, it will eventually go away. There are laws that limit the length of time those things can follow you. So if you are financially responsible in the meantime, your overall credit score well steadily rise over time. This makes it easier to qualify for a loan, and it helps you get the best interest rates at the same time. This is the real "secret" to clearing up a bad credit history.

So what have we learned by all this? For one thing, we have learned that you cannot wave a magic wand and clear up a bad credit history instantaneously. Sure, you can (and should) review your credit reports for errors, and dispute those errors to have them removed. And yes, you can certainly change your financial behavior for the better. But the financial mistakes up the past will follow you for 7 - 10 years, depending on what they are. You can certainly improve your credit score over time, by changing that behavior. But you cannot change the past.

Unfortunately, a lot of companies will lie to you and say that they can repair your credit and clear up any bad items from your credit history. Most often, this is just a scam designed to elicit payments from you. The only thing these companies can do is (A) have errors removed from your credit reports and (B) offer advice on how to change bad financial behavior for the better. But they cannot magically clear up the past.

Is 700 a Good Credit Score in This Economy?

Reader Question: Is 700 still a good credit score in this economy? Will I be able to get a mortgage loan with a score in the 700 range?

A couple of years ago, I would have said, "Sure, 700 is a good credit score and you should have no trouble qualifying for a loan. And you'll probably get a very good interest rate with a score in that range."

But that was then, and a lot has changed since then.

First, let's come up with a basic definition for a good score. Instead of putting an exact number on it, which is nearly impossible, let's define it this way. A good credit score is one that allows you to qualify for financing (in this case a mortgage loan) with a decent interest rate at the same time.

As many home buyers are finding out, however, the numerical definition of a good credit score has bee shifted upward since the economic crisis started. In other words, you need a higher score these days to (A) qualify for a home loan and (B) get the best rate on that loan.

So where does that leave somebody with a credit score in the 700 range? Well, based on what I've seen in recent weeks, I would say this. While you probably won't have trouble obtaining a mortgage with a 700 credit score, you probably won't qualify for the best rates.

A couple of years ago, before the housing meltdown and mortgage meltdown, you could have qualified for the best interest rates with a score of 650 or higher. So you would have been sitting pretty with a credit score of 700 ore more. Today, however, all of the mortgage-qualification standards have been elevated. So you would probably need a 720 or above to qualify for the best rates.

Just remember that every lender is different. Sure, there certain rules of thumb regarding credit scores and home loans. But there is still a lot of variation. So you should shop around to see who will offer you the best terms and rates.

To sum up...

Is 700 considered a good credit score in the current economy? Yes. Is there room for improvement? Absolutely. Will you qualify for the best mortgage rates with a 700 credit score? Probably not. Will any of this change six months or a year from now, for better or worse? Only time will tell.

What Does Three Credit Reporting Mean?

Reader Question: I was reading a home buying article recently, and it kept talking about the importance of three credit reporting when trying to get a mortgage loan. What does three credit reporting mean, and how does it affect me when applying for a loan?

The article was probably referring to the fact that there are three credit-reporting companies in the United States. They are Experian, TransUnion and Equifax. These privately-held companies are basically big data vaults that maintain historical financial data on U.S. consumers, in the form of credit reports. So when the article used the phrase three credit reporting it was talking about the collective reporting efforts of these three separate companies.

Now let's move on to the second part of your question: "How does three credit reporting affect me when I apply for a mortgage loan?"

You can think of the information contained within your credit reports as a snapshot of your past financial behavior. If you have been financially responsible in the past, then your credit report should reflect this. (I use the word "should" because it's not uncommon to find errors in a credit report.) On the flip side, if you have a habit of missing bill payments, or if you've had a bankruptcy in the past, then these negative items will also show up on your report.

The information provided by the three credit-reporting agencies is used to create your credit scores (you have more than one of those, as well). And this is where mortgage approval comes into the picture. When you submit an application for a mortgage loan, the lender will review at least two of your credit scores to see what kind of financial history you have. If your score is high, you'll have a good chance of getting the loan -- and getting a good interest rate on the loan. But if your score is bad / low, you might have trouble getting qualified for the loan.

So the important thing to remember about three credit reporting is that your financial behavior in the present will affect you in the future, any time you seek financing from a lender. Your financial activity shows up in your three credit reports, which are then converted into scores. Lenders will then use those numerical scores when considering you for financing.

I hope this answers your questions about three credit reporting and I wish you well in your home buying experience!

Where Can I Buy a Cheap Credit Report Online?

Reader Question: I see tons of credit report offers online, but most of them want me to sign up for something besides the report. Where can I go to buy a cheap credit report online without all the extra stuff?

Is free cheap enough for you? By law, you are able to request one free credit report per year from all three of the credit-reporting agencies. You can also do it online in one step by visiting a website that's jointly owned by the three agencies. The website is www.AnnualCreditReport.com.

Many people trying to buy a cheap credit report online don't even realize they can get one for free. That's one of the reasons we started this blog -- to offer straightforward advice and help to consumers. Here's a similar question I answered just a few days ago.

Other Ways to Get Cheap Reports

But what if you have already ordered your free annual report and you need another one? First of all, we don't recommend doing frequent credit inquiries on yourself. But there are some situations where you may need to check your credit report twice in the same year (if, for example, you think their might be some kind of fraud taking place). Now you have a legitimate need to ask the question: "Where can I buy a cheap credit report online?"

If you have already used your "freebie" for the year, my advice is to use a company that will give you access to all three of your reports. On the contrary, if you purchased your report directly through one of the reporting bureaus (such as Experian), you would still need the other two reports from Equifax and TransUnion.

Fortunately, there are safe places you can go online to get your credit report for fairly cheap (and in many cases, they come with your scores as well). Check out the tools page for more information on these kinds of services.

I hope that answers your question. Thanks for visiting!

Parents Put Utilities in My Name - Now I Have Debt

Reader Question: If you are about to turn 18 and you are already in debt because your parents have opened utilities in your name but you don't wish to get them in trouble what do you do?

You have a decision to make, and only you can make it. I can only explain how this will affect you in the long term. Let me start by saying you are not alone. I learned from a credit class I once took that this happens in this country. I wouldn't say it happens frequently, but it happens enough for it to be mentioned in a credit training course.

Here's what you need to know. If the utilities stay in your name, then you are going to have negative credit information on your credit report for several years. Most negative information (in this case, unpaid bills) will stay on your report for a period of seven years. And because your credit score is based on the information contained within your reports, this kind of thing can lower your credit score as well.

Bad credit has two primary implications. For one thing, it makes it hard to get financing from a lender. This includes car loans, student loans and home mortgages. The second way it hurts you has to do with interest. Because even if you do get financing with a bad credit score, the lender is going to charge you a higher interest rate on the loan (than they would charge a person with good credit). This, of course, increases the size of your loan payments.

If I were in your situation, I would get the utilities out of my name so I could have a chance to build good credit. You can establish a strong credit score by being financially responsible -- by paying all of your bills on time, keeping your debt levels low in relation to your income, etc. But if the utilities stay in your name, and delinquent payments are associated with that account, then it's going to drag your credit score down.

In case you missed the link above, here's an article worth reading:
Parents Abuse Kid's Good Credit

I hope that helps you gain some perspective on this issue. Good luck.

How to Improve Your Credit Rating

Reader Question: I plan to buy a home next year, and I've been told I need to have a good credit rating in order to get a mortgage loan. What exactly does this mean, and how do I improve my credit rating if it's low?

This is a question a lot of people are going to be asking in 2009, in my opinion. I'll explain why in a moment, but let's start with some terminology.

When you hear the term credit rating it usually refers to a person's credit score. This is a numerical number (usually between 300 and 850) that is based on information within your credit reports. There are three different companies that maintain this information on U.S. consumers -- TransUnion, Experian and Equifax. These companies generate credit reports, which are then converted into scores.

So when you hear somebody say they need to improve their credit rating to get a loan, they are talking about improving their credit scores. It's just a different way of saying the same thing.

Why Your Credit Rating is Important

When you apply for a mortgage loan, the lender will review all aspects of your financial background. This includes your income, the amount of debt you have, and your credit rating and history. This gives them some idea of how well you have managed your finances in the past. Obviously, a lender needs to know your credit rating and related information, because it helps them assess the level of risk involved with giving you a loan.

If you have a good credit rating (a higher score), then there's a good chance you'll be approved for the loan. You also have a better chance of getting a low interest rate on the loan, which equates to a smaller mortgage payment each month.

On the other hand, if you have a bad credit rating (a lower score), then you will have trouble getting approved for a mortgage loan. And if you do get approved, you'll end up paying a much higher interest rate -- which means a bigger mortgage payment.

This is why your credit rating is so important if you plan to buy a home in the near future. It's also why so many people are trying to improve their credit ratings these days. Because of the economic crisis we are experiencing right now, lenders are really strict about qualifying borrowers. So if you want to get financing in the "new economy," you actually need a better credit rating than what you needed a couple of years ago.

That's what I meant when I said that a lot of people would need to improve their credit rating in 2009. The question is ... where do you start? Here are some tips.

How to Improve Your Rating

There are a lot of things you can do to elevate your credit score. Basically, anything you can do to be financially responsible will help you improve your rating. This includes paying all of your bills on time, reducing certain types of debt (such as credit cards), and correcting errors on your credit report.

We have a bunch of articles on the main website that will help you improve your credit rating before applying for a mortgage loan. I recommend starting with these:

• Credit Repair 101 - What Home Buyers Should Know
• How to Improve Your Credit Score

I hope this answers your question, and wish you all the best in your home buyer experience.

Writing a Letter to Dispute My Credit Report - Sample Letter

Reader Question: I recently ordered my credit reports and found an error on one of them. I know that I can dispute the error online through the company's website ... but should I also write a letter to dispute the credit report with the mistake on it?

Yes, I recommend that you send a letter in addition to completing the online dispute form. It always helps to have a paper trail. I would start with the online dispute process covered below, and then I would follow up mailing a cover letter with any supporting documentation, evidence, etc. The credit reporting agency will probably advise you the same. See the sample dispute letter at the bottom of this response.

Disputing Credit Report Errors - How and Why

The information contained within your credit reports (you have three of them) is very important when trying to obtain financing for a car, a house, etc. This information is used to compute your credit score, which is what lenders use to qualify or disqualify you for a loan. So an error in your credit report could have a significant impact on you -- depending on what type of error it is.

This is why you must dispute credit report errors when you find them. As you've already learned from this person's question, it can be done online or by mail. We recommend both.

It's also important to note that the information in a particular report is the responsibility of the company that produced it -- either Equifax, Experian or TransUnion. So as an example, if you find an error in the credit report you get from Experian, you would send your dispute letter to that company only.

As mentioned, you can also dispute credit report mistakes through the company's website. While writing this response, I visited the websites of all three companies mentioned above and verified that there is an online dispute link available from each of their home pages.

One note about Equifax though. When I visited their website and tried to use the online dispute form, I was asked to start the process by entering my zip code. I then received the following message: "We are unable to process your dispute request. You live in an area with a zip code that is managed by CSC CREDIT SERVICES. To complete your dispute you may click on the CSC Credit Services link below." Depending on where you live, you may get the same message. Just another layer of bogus red tape, if you ask me ... but it is what it is.

Sample Dispute Letter

As I mentioned at the start of this response, you can begin the dispute process online through the credit reporting company's website -- and I recommend that you do. This will get the ball rolling. If you have additional paperwork to send them in support of your dispute, then you can send it by mail with a cover letter like the one below:

---

Sample letter for credit report dispute...

Today's Date
Credit Bureau Name (Experian, Trans Union or Equifax)
Address (you can get it from their website)

Dear Sir or Madam:

I recently received a copy of my credit report from your company, and I found inaccurate information within the report. I am writing to request that this information be corrected. I have completed the online dispute form through your website, and I am following up with this letter to provide additional documentation.

I request that you research the items listed below and respond to me within 30 days of your receipt of this letter, in accordance with the Fair Credit Reporting Act. I have enclosed a copy of the erroneous credit report I received from your company, along with other documentation that supports my dispute.

*** After this introduction, explain what error you found and why you feel it is erroneous. Refer to your supporting documents as needed for support / evidence. ***

Common disputes include the following:

• An account that does not belong to you shows up on your credit report
• Unauthorized credit inquiries that somebody made without your consent (this is illegal)
• Some kind of error with your personal info (name, SSN, date of birth, etc.)
• An account you closed that still appears to be open on your credit report

When the item(s) listed above have been corrected, please send an updated report to me and to anyone who might have requested my credit report within the last six months. If I do not respond to my dispute within 30 days, I will assume you are unable to verify the disputed information, which means you must correct or remove the items listed.

Sincerely,

Your full name
Your address
Home phone number
Your social security number*

* Be careful with your handling of this letter, since it will have your SSN on it. Treat it as you would any other sensitive document with private information.

Totally Free Credit Report With No Strings Attached

Reader Question: I always see free credit reports advertised online. But when I read the details, it seems that I have to sign up for some kind of credit monitoring service. Is there really a such thing as a totally free credit report with no strings attached ... and if so, where can I find it?

This is a great question, and you are not alone in your confusion. Hopefully, after reading this explanation, you'll never be confused by this subject again.

Yes, there is a such thing as a totally free credit report with no strings attached. And by law, you are entitled to one per year. You see, there are actually three companies who maintain credit data on consumers in the United States. They are Experian, Equifax and TransUnion (in no particular order). So if you want a detailed picture of your credit history, you should request your reports from all three of these companies. They are all independent of each other, so the data contained in any one report will vary.

Here's how you get your totally free credit report with no strings attached. The three companies mentioned above have a jointly owned website at AnnualCreditReport.com, and that's where you would go to request your free credit report. Like I said, you can do it once per year for free.

Your credit score is a different story. If you get your free credit reports through the website mentioned above, you will have to request your score separately (and you'll probably have to pay a nominal fee for the score).

A lot of companies package all of this together and add on other services like credit monitoring. They will refer to it as "3-in-1 credit reports and scores" because it gives you everything at once, often with the monitoring service that is paid on a month-by-month basis.

So to sum up...

• Yes, you can get totally free credit reports from the website mentioned above -- once a year, at least.
• If you request your reports through that website, it will not come with your credit score. You'll have to order that separately and will likely pay a small fee for the information.
• Many companies package all of this stuff together (reports + scores + monitoring) and sell it for purposes of convenience.

Hope that helps!