Negative remarks affect on your credit score
There’s no question about it at all. Derogatory or negative comments (late payments for example) about your credit are harmful because companies rely upon each other’s reports in determining an applicant’s credit standing. Lenders in particular, and specifically, automobile finance firms and mortgage companies, base their credit decisions upon the FICO score (credit rating) determined by the three major credit bureaus. Regrettably, any derogatory comments in your credit report have a negative impact on this FICO score which can markedly lower your rating and cause the lender to give you a higher interest rate or no loan at all.
First, learn what your credit report says
Believe it or not, there are more people who don’t really know what their credit report says than there are that do know. And this can change from year top year as new reports and statistics influence your credit rating. So, the first order of business is to obtain a copy of your credit report from the three major credit reporting agencies—Equifax, Experian and TransUnion. You can obtain a free copy once each year from each agency thanks to the Fair Credit Reporting Act (FRCA) which guarantees this to every citizen in the U.S. All you need to do is go to services such as freecreditreport.com on line. Provide the required identifying information and get the reports on the spot. You can also write each agency and request one. Moreover, should you need help understanding the credit reporting criteria, there is a ton of explanation online as well, also free.
Deal with derogatory remarks
Once you have the three agency’s reports on hand, read each of them carefully. If there are comments or errors, you are entitled to challenge them and have them removed or corrected. Remember that this incorrect info can influence your financial destiny and more. Employers, banks, insurance companies and others order your report and bad remarks can impact their decisions about hiring you, giving you a mortgage at a low interest rate, etc.
To correct these errors, first understand them. Often, they are statements that report your were 30, 60, 90 or more days late; that your debt was “charged off” or that your account was sent to a collection agency. There may also be a statement that the creditor had to close your account due to mishandling. If you happen to note that one or more of the reports has numerous “R9s”in it, this is credit speak for being charged off or sent to a collection agency.
Creditors must prove their reports are correct
It shouldn’t surprise you to know that the credit agencies won’t merely take your word for the legitimacy of your request for a change. They are required under the law to actually investigate the facts with the creditors involved. The creditor is responsible for proving his case is correct and, should he fail to reply, you will win the argument. Even if you lose and the creditor verifies, your comments in rebuttal will usually be included in your report. If you are wrong, you can also contact the creditor and make a deal to settle the amount owed in return for them reporting that the matter has been fully satisfied.
Beware of some credit repair firms. Many are scams
There is nothing any online business can do for you to correct errors that you can’t do yourself. In addition, they will charge you for doing it. Perhaps worst of all, many of these companies will do nothing after they debit your credit card or bank account for their fee.
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