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  7 Ways to Clean Up Your Credit Report

Where to Find Your Credit Report

If it's been years since you've given your credit report a good once-over, or if you never have, even figuring out where to start can be daunting. Luckily, federal law entitles you to a free copy of your credit report once every 12 months from the three major credit-reporting agencies: Equifax, Experian and TransUnion. You can get a free copy of all three bureaus' versions of your credit report at AnnualCreditReport.com.

To check your credit report every few months, order one at a time and space them out over the course of the year. If you're getting acquainted with your credit history for the first time, order all three at once. If you live in Colorado, Maine, Maryland, Massachusetts, New Jersey or Vermont, you're entitled to a second copy of each report annually, says Steve Bucci, Bankrate's Debt Adviser and author of the forthcoming book "Credit Management Kit for Dummies." Georgia residents can get three a year from each bureau.

If you're turned down for a job or credit, or you don't get the best rate available, you also have a legal right to see your credit report at no charge. The paperwork you get notifying you of the decision will include a number for you to call.

Start With Your Identification Basics

It's easy for people to forget the most important part of their credit report: checking their identifying information, including name, current address and Social Security number, says Natalie Lohrenz, director of counseling at the Consumer Credit Counseling Service of Orange County.

"People obsess over tiny fluctuations in their credit score, but what they should focus on is the question, 'Is it accurate?'" she says.

Small discrepancies, such as an account that has your nickname listed instead of your given name, don't impact your score, but if there's a more serious discrepancy such as an incorrect Social Security number, you'll want to get it straightened out, says Maxine Sweet, vice president of public education at Experian.

After checking all of the identifying information, look at the accounts and make sure they're all yours. Keep in mind that some lenders, such as the financing companies that issue many store-brand credit cards and companies that handle medical billing, might have a different name than the one on the storefront or hospital.

Scan Your Reports for Discrepancies

"If you see an account you don't recognize, you definitely want to call that to a credit bureau's attention," says Craig Watts, public affairs manager for FICO. "Definitely find out what's going on. If you see any negative information like a collection account that you don't think belongs there, it could be somebody else's account that got into your report by mistake, or something you forgot about," he says.

Watts says another red flag can be an account with a much higher balance than you carry. Since any of these items could indicate a case of mistaken identity or identity theft, these are issues to address right away.

Jessica Cecere, a regional president at credit counseling organization CredAbility, says one common -- and more benign -- credit report error she encounters is the inclusion of old negative information that should have come off the person's record. Most negative information stays on for seven years, and Chapter 7 bankruptcies remain for 10. "A lot of times the information on your report doesn't automatically fall off at that seven-year mark," she says.

Watch Out for Phantom Money

Lohrenz says consumers with a history of collections in their past can have their outstanding balances appear larger than they actually are because of the booming secondary market for collections. Here's how it happens: If a consumer has a credit card balance that becomes delinquent, the issuer will attempt to collect for a while, then give up and sell the account to a collection agency.

The card balance should then drop to zero, and a new account, this time with the collection agency, will appear on the report. Sometimes, though, the issuer won't strike that balance from their records, so it will appear as if the consumer has two outstanding debts. If the debt is bought and sold numerous times, which is common, the problem can multiply.

Another instance of "phantom money" can occur when a consumer has a closed bank account that has an overdraft protection line of credit tied to it. In some instances, that line of credit will remain on a person's report even after the account is shuttered, says Bucci.

How to Dispute a Mistake

If you do find a major mistake, order your credit report from all three bureaus. Doing so can help you figure out if the problem is limited to just one report. The next thing to determine is if you need to take your dispute up with the credit-reporting bureau or the lender.

If there's a case of mistaken identity, such as someone else's information on your report, or accounts listed that aren't familiar to you, contact the bureau. All three bureaus have online dispute forms, which Sweet says is a faster method of resolution than snail mail.

"Taking things up with the bureau is easier because they have one set process," points out Bucci. "There's a dispute process in place so you can dispute any account with the same process, whereas when you contact the creditor, every one's a little different. It's not as neat and simple."

In the case of negative information more than seven years old or a report of an outstanding balance that has actually been paid off, try contacting the lender directly.

Following Up

It would be great if you could just file a dispute and forget about it, but you may have to follow up. Especially if an item is very old, the creditor in question may have been bought, merged or gone out of business entirely, which makes documenting everything important.

Keep notes of the people you speak with at the bureau or lender, when you contacted them and the date by which any corrective action will be taken. Check your credit report again after that date to make sure they followed through. The three credit bureaus "talk" to each other electronically, so a correction made on one report should be reflected on the other versions, too.

What Not to Sweat

There are a couple of items pertaining to your credit report that might seem alarming but really aren't a big deal. Closed accounts in good standing don't need to be taken off your report, contrary to what many think. In fact, leaving them on your report can help.

Credit inquiries also aren't as damaging as many people believe, says Sweet. "Honestly, a hard inquiry is very small impact on your credit score, and it's short term. It stays on for two years but it has the most impact only within six months." A "hard" inquiry will appear if you applied for a loan or credit card. It can also crop up if you enter into a service contract such as a cellphone or cable TV plan.

Lohrenz says not to stress about the actual credit score itself, the three-digit number lenders use as a baseline to gauge your level of risk. It's what the report contains that dictates your score, so concentrate on making sure it's accurate and up to date.

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