Make sure credit report reflects good payment history

by Center for Personal Finance editors

PALM BEACH GARDENS, Fla. (5/10/06)--Currently there's no law that requires a creditor to report your on-time payments to credit bureaus--the system is strictly voluntary. So if only negative payment history is reported, or if you have a mistake on your credit report that hasn't been fixed, your credit score could suffer, affecting your ability to get credit at reasonable rates, insurance, or even a job (MarketWatch.com May 1).

Regulators are soliciting comments--by May 22--about your experiences with credit reports and credit scores, and your comments could influence guidelines for anyone who provides information to credit-reporting agencies. Financial regulatory agencies soliciting feedback include Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Federal Reserve System Board of Governors, Office of Thrift Supervision, National Credit Union Administration, and Federal Trade Commission (FTC).

Your comments can be registered at regulations.gov. Search "documents open for comment" and type "credit report" in the keyword search field.

Check your credit report annually from each of the three major credit reporting agencies. If any of those reports has errors, start by contacting the creditor responsible for reporting the inaccurate information. Under the Fair Credit Reporting Act, both the consumer reporting agency and the information provider are responsible for correcting inaccurate or incomplete information in your report. Send documentation that backs up your claim. If the creditor admits the error, get a letter of correction and send that letter to the credit reporting agency. If you ask, the credit reporting agency must send notices of any corrections to anyone who received your report in the past six months. According to the FTC, you can have a corrected copy of your report sent to anyone who received a copy during the past two years for employment purposes.

What should you do if you're not successful in getting inaccurate information corrected on your credit--even if you followed proper procedures by writing to the major credit bureaus? The FTC recommends the following:

Write a statement of 100 words or less clearly stating the reasons why you've disputed the accuracy or completeness of the item on your credit report, and send the statement to the credit bureau. The statement must be added to your report at no charge.

When you apply for loans, request in writing that the potential lender consider information indicating that your credit history being considered is inaccurate.

Realize that under the Fair Credit Reporting Act, you can sue the credit reporting agency for negligent or willful noncompliance.

If you have additional documentation, resubmit your dispute to the credit reporting agency.

Over half of credit reports contain errors. Order your free credit report from each of the three major credit reporting agencies each year; go to annualcreditreport.com for details, or call 877-322-8228. You can order your credit score but expect to pay $4 to $8 per credit score.