1. I got my credit report, now what?

Once you get your credit report, get comfortable and really study it. This means first learning to read it. Your report will include a set of instructions that will help you decipher the symbols and notations used by the credit bureaus. Once you familiarize yourself with the coding symbols used by the credit bureaus, look for and mark any damaging information recorded on your report. You should especially be looking for negative information that is erroneous. Some of the common negative marks are the following:

1. Past due history: This is a history of the timeliness of your payments for each one of your listed creditors. The past due symbols will state the number of past due payments, if any, that were 30, 60, or 90 days old. These kinds of "dings" are the most common negative remarks and also have the highest likelihood of being erroneous.
2. Collections or P&L (profit and loss): Collections appear when your account has been turned over to a collection company for collecting. P & L appears on your credit report when one of your creditors has decided not to bother trying to collect the money from you. Rather, the creditor wrote your account off as bad debt.
3. Inquiries: These marks result from potential creditors requesting your credit report. Remember, they cannot request your credit report unless you have given them permission. Accordingly, review these inquiries for accuracy.
4. Public records: Bankruptcies, liens, and some court judgments also appear on the public records portion of your credit report.

2. How do I determine my credit rating?

See above for common ways creditors score your "credit-worthiness." Normally each account on your credit report provides you a summary rating based on your payment history. The basic ratings are negative, non-rated, or positive based on the number and severity of the negative information for that particular account.

3. I found some errors on my report, what are my rights?

The Fair Credit Reporting Act (FCRA), codified at 15 U.S.C sections 1681a through 1681t, provides the framework designed to help you eliminate erroneous or unfair credit information from your credit report. All consumers have the right to challenge the accuracy of their credit report. Once you challenge the accuracy of a particular item of information, the credit bureau must investigate that item within 30 business days (before September 30, 1997, it was within "a reasonable period of time").

If the credit bureau finds that the challenged information is erroneous or cannot be confirmed or denied, it must be promptly removed from your credit history. Even if the bureau confirms a particular item that you have appealed, you have the right to a Consumer Statement (100 words or less, explaining your side of the story) included on every credit report copy that the bureau sends out.

4. Before I challenge items on my credit report what should I know?

A credit bureau is required by law to investigate the information that you challenged on your credit report unless it is "irrelevant or frivolous." Therefore, in order to avoid such a charge, it is best to challenge each item separately because a general challenge may be considered frivolous. Pursuant to United States Code, Title 15, Chapter 41, Subchapter III, Section 1681i, an item must be removed if, upon investigation by the credit bureau, it is found to be "inaccurate, incorrect, erroneous, misleading or outdated." Therefore, it is important to use one of these reasons in your challenge as the grounds for your dispute.

5. What steps should I take to correct negative information on my credit report?

One of the most effective ways to have negative marks removed from your credit report is to challenge the accuracy or completeness of the information through a letter to the credit bureaus pursuant to 15 U.S.C section 1681i. The only limit that is placed on your right to challenge information on your report is that the challenge should not be frivolous or irrelevant. It is best (though not necessary) for you to include documentation that supports your challenge.

Be sure to send the letter by certified mail with return receipt requested so that your efforts are fully documented.

If after a reasonable period of time (usually 4-6 weeks) the credit bureaus have not responded to your letter, you should write a letter reminding them of their obligation under the law to investigate your challenged item(s). If the credit bureau fails to reverify the items that you challenged within a reasonable time (defined as 30 business days) from the date the credit bureau received your challenge, the FCRA gives you the right to have the disputed item removed from your report.

After following the above procedure, get another copy of your credit report (this should be for free) and make sure it reflects the proper changes.

6. Why is challenging erroneous entries on your credit report so effective?

Often it is possible to eliminate many of your negative marks simply by disputing them using the above methods. Why is this true? For three reasons:

First, credit bureaus may be so busy during a particular period that they are unable to reverify the challenged information within the time limit and therefore must remove it. Second, due to human error, information is inadvertently deleted in the process. Third, after two or three years, a closed or inactive file is often stored offsite by a creditor making it not readily accessible. Accordingly, when credit bureaus contact creditors for verification of an item (especially an old item) that you challenged, creditors frequently fail to respond due to the amount of work that it takes to dig up your file. This failure to respond helps you clear your credit record even when you do not have documentation to corroborate your challenged item(s).

7. What do I do if a negative entry is confirmed by the credit bureau?

If some of your negative marks were in fact verified by the creditor(s), wait 1-6 months and try repeating the above process.

If this is still futile you have the right to have the credit bureau include a Consumer Statement of 100 words or less in your credit report explaining your side of the story. In the meantime, follow the credit building steps below to offset your negative items with positive ones.

8. What if the items are true and the creditor repeatedly verifies the information to the bureau?

If you’ve tried the above procedure and you still have accurate marks left on your report, you must attempt to directly persuade the creditor to remove the information from your credit report. First, determine the reasons that caused the negative information. For example, did you make late payments due to your moving and a mix-up at the post office? Were you temporarily laid off from work and when you returned to work you quickly paid your bills? If you feel that your reasons are good ones, try writing directly to the creditor explaining your position and asking for the removal of the negative information.

9. Can I get the negative marks removed by paying off the creditors part of what I owe?

Depending on the kind of debt you owe, frequently it is possible to pay part of your debt for the removal of the negative information on your credit report. However, it is much easier to negotiate on a general unsecured debt (e.g., Visa, MasterCard, and most department store cards) than secured debt (backed by collateral like a car loan). Secured debt usually cannot be settled for a lesser amount than the property is worth or the amount you owe, but payment plans usually can be worked out.

The extent to which you will be able to negotiate the partial payment of an unsecured debt is usually commensurate with the creditor's perception of your ability to pay that debt in the near future. If you are up to date on all your payments and you try to negotiate partial payment you probably won’t get too far.

On the other hand, if the creditor believes that you are unlikely to be able to pay back the debt any time soon and they have written your account off as "bad debt," you may be in the driver's seat. This is frequently the case when the creditor has had no luck in collecting from you and has essentially given up. In this case you may be able to offer the creditor a fraction on the dollar in satisfaction of the debt and the deletion of negative information from your credit report.

If your account has not yet been written off as "uncollectable," it may be more difficult to negotiate a partial payment in return for removal of negative information. If you can’t pay it in a lump sum, offer payments in installments in exchange for the deletion of negative items.

Keep in mind that if a creditor believes that you're on the edge of filing bankruptcy and that this is their last chance to get something out of you, you will usually be able to call the shots. Also, it may be wise not to emphasize the importance to you of having negative credit information removed from your credit file. However, I cannot emphasize enough, whatever you agree upon verbally, reduce it to writing and have the creditor sign it.

10. When negotiating with a creditor, is it sometimes preferable not to mention that you want negative credit information removed from your credit report?

Alternatively, when you are negotiating with a creditor with regard to the amount of your debts, you may not want to bring up the issue of erasing the negative credit item. Instead, along with the check for the amount of the negotiated settlement, attach to the check a writing that states as a condition of cashing the check the creditor is to remove the negative listing from your credit report. This is called a "conditional endorsement."

You must ultimately decide which negotiating technique to use. In the latter technique, a creditor will often be tempted by the fact that the check is right there and consequently will cash it. The problem may be enforcing your rights under the conditional endorsement. On the other hand, the creditor may return your check and you are back to the drawing board in terms of the negotiation process.