Bad credit puts repuation at risk

NEA Today, Nov 1994 by Rowland, Mary

Anyone who does any kind of business with you routinely checks your credit report. A bad credit report can cost you a job, a promotion, an apartment, a mortgage, an award, or a political appointment.

"Your credit rating has become a reflection of who you are as a financial person," says Esther Berger, a financial consultant and vice president at PaineWebber in Beverly Hills. "It's used as a benchmark to measure you, and all kinds of decisions are made based on it."

That means everyone needs a good credit report. The first step is to get a copy of yours. Start with TRW Corporation, one of the three largest credit bureaus, and the only one that gives a free annual report. The complimentary report was offered a couple of years ago after the bureau came under attack for making so many mistakes on consumer reports. You may as well use that to your advantage.

To get your copy, you must send a request in writing to TRW, P.O. Box 2350, Chatsworth, CA 91313-2350. You must include a verification of your name and address--a photocopy of a billing from a major creditor, a utility bill, or a driver's license that includes your current address.

Print your name, middle initial, last name, and spouse's first name. Give your current address and any previous addresses for the past five years. Sign the request. You should receive the report in two to three weeks, TRW says.

Examine the report carefully. Look at the footnotes to be certain you understand the cryptic symbols. For example, "C/OAM" means "charge-off amount," indicating that a creditor has written you off for nonpayment.

Write to the bureau immediately if you find anything suspicious, disputing the information and asking for an investigation. If the bureau can't verify the data, it must be removed. And, if you wish, TRW must notify any creditor who saw the incorrect information in the past six months or any potential employer who saw it in the past two years.

If, after an investigation, the credit bureau concludes that the disputed information is correct, but you still say it's wrong, go back to the creditor--the bank or store that provided the incorrect information--and get it to amend your record. This may involve pulling all your records, receipts, and checks as documentation.

Follow up, making certain the creditor reports the change to the bureaus. You should also add a statement to your file if some life crisis, such as a job loss or divorce, has caused you to fall behind on bills.

You may be able to help a bad (but accurate) record by approaching creditors directly. For example, if a creditor wrote you off as a lost cause, offer to begin repayments if your file can be corrected and updated. If your record indicates you're a "slow pay," start settling your accounts promptly. "The new information will become more important than the old," said Ruth Susswein, executive director of Bankcard Holders of America, a consumer group in McLean, Virginia.

Negative information on your report that is accurate can't be removed for seven years. Bankruptcies aren't removed for 10 years. Don't waste money on "credit doctors" or credit repair firms that claim they can clean up your report for a fee of anywhere from $200 to $700. Some of these firms flood the credit bureau with letters disputing all the information on your report because they know that the bureau must remove it if it can't be verified within 30 days, Susswein says. As a result, the information is removed--temporarily--and the credit repair firm claims a victory. But when the creditors report the information anew, it goes right back on your file.

"The point is what they promise to do, they can't do," she says.

Likewise, resist the sales pitches of major credit bureaus for services that will monitor your records. For a fee of about $20, they promise to let you know if negative information is added to your report. You can save yourself the money by checking your report once a year.

Even if your report is negative, you shouldn't give up on credit. If you're simply a slow pay, vow to change your habits. If your bills have been written off by companies as uncollectible, or if you have filed for bankruptcy, you will have some work to do in rebuilding your credit.

Perhaps the best option is to obtain a secured credit card. This is a card that requires collateral, like a bank deposit, that is roughly equal to the amount of the credit line. For example, you might be required to deposit $300 in the bank in order to receive a $300 credit line. You'll receive interest on your deposit. And you'll pay interest on the items you charge.

Not so long ago, there were only a couple of banks that offered these cards, Susswein says. Everyone in the business knew who they were, and secured cards were viewed differently by other creditors.

Today there are nearly 20 banks that offer secured cards. The same banks also offer unsecured lines. Although the credit bureaus ask banks to report whether a particular credit line is secured or unsecured, in a Bankcard Holders survey, only one bank said it did. "It looks and acts like any other credit card," Susswein said. "And it can help you rebuild your record."