Clean Up More Than Your House This Spring

April 14, 2014

As of this spring, it has been exactly two years since our family moved into our home after a cross-town move to be closer to our children’s school and their GiGi and PopPop. It’s amazing how fast time flies but it’s also disturbing how much junk we have accumulated in that short amount of time. (For the most part, when I say junk. I am referring to toys and gadgets for the kids and our dog.)

Some of the toys are old and out of favor just like some of our clothes in the closet. That’s why the first few rainy days of spring are designated as spring cleaning. Every time we go through the spring cleaning process, it’s inevitable that we will find something hidden in a closet that just doesn’t belong to us (perhaps left behind by our kids’ friends or mysteriously acquired by our dog that is part golden retriever and always brings us presents).

When it comes to our financial lives, it is also easy for mysterious items and other forms of financial “junk” to appear on our credit reports. It’s been estimated that about 70% of credit reports have errors on them. Did you know that these errors could be hurting your chances of getting a good rate on a loan, a low insurance premium, or even a job or promotion? (Hopefully your credit report doesn’t have as much clutter as my garage, which somehow turned into a storage facility.)

There are some simple steps you can take this spring to start cleaning up your credit.

  • Obtain a free copy of your free credit report at annualcreditreport.com. Everyone is allowed to get one copy for free every 12 months.  There are 3 credit bureaus, Equifax, Experian and TransUnion.  One method to check all 3 is to request a different one every 4 months.  That will help you see whether things are improving as well as spot any differences or irregularities.
  • Don’t miss any payments!  It is often estimated that 35% of your credit score is based upon timely payment of your bills.  Setting up your accounts on auto pay can help you avoid late payment penalties and interest rate hikes and improve your credit score.
  • Reduce your balances. Make an effort to pay down your credit cards to less than 30% of your available credit limit.
  • Avoid excessive credit inquiries. Don’t apply for a card at every store in the mall.  Too many applications hurt your score.  But remember that checking your own credit report does not hurt your credit score.  These are considered soft inquiries which do not hurt your score. Applying for new credit through a mortgage, a car loan, or credit card applications are hard pull inquiries. Too many of these can hurt your credit score.
  • Don’t avoid collectors. Even if you cannot make a payment in full, don’t make these common collection mistakes. Make sure any collections are cleared up as quickly as possible.  Even people with great credit can have a hiccup.  Medical, cable, cell phone and utility bills are notorious for getting missed and showing up in collections.  If possible, offer to pay it in full and ask if they will remove it from your credit report.  If they do, that’s great and if not, it shows as paid in full.  Just be sure to get any agreements in writing. If you can’t afford to pay all of it, offer to settle the bill.  50% of the balance may be accepted if you can pay it in one lump sum.
  • Be absolutely sure that you document any settlements you make or agreements you make.  Get them to email you a signed letter on their letterhead agreeing to your terms before you pay anything.  This will protect you if they don’t honor their end of the deal and you need to file a dispute.
  • Dispute any errors that you may find. If you find any errors on your report, be sure to dispute them on the credit bureau’s website immediately.  Gather any proof that you have and upload it with your dispute claim or mail it in if necessary.  Even something as harmless as an address you never lived at can inadvertently link you to someone else’s credit – and lead to collectors harassing you for their debt.
  • Take advantage of free credit monitoring services. Don’t pay for credit monitoring services that you can obtain for free. Consider credit building sites like Credit Karma or Credit Sesame to monitor your credit and also see what specific steps can help boost your credit score.

Welcome in the warmer weather with some important spring cleaning.  But don’t stop by just cleaning out the closets and sprucing up your yard.  Get your financial house in order and make sure there isn’t any unnecessary information on your credit report.

Resources:

Annual Credit Report– www.annualcreditreport.com

Dispute errors on your credit report– https://www.consumer.ftc.gov/articles/0151-disputing-errors-credit-reports

Credit Karma– www.creditkarma.com

Credit Sesame– www.creditsesame.com