Every year, 10,000 US businesses funnel consumer credit information into the data banks of Equifax, TransUnion and Experian. The major credit reporting agencies deal with 1.3 billion credit files at a time. Of these, 35 billion entries are disputed at a rate of 8 million annually. Such colossal statistics make errors unavoidable, yet only 20% of consumers check their reports every year. To add to the nightmarish credit repair landscape, identity theft has reached into 7% of American households, bringing its own brand of financial fatality. In 65% of cases, a stolen identity is as valuable as the credit worthiness attached to the chosen victim: Credit card fraud remains the primary goal of the crime. The global recession has played its own role in leaving consumers with debt hangovers, whilst simultaneously turning lenders into jittery risk assessors who are only willing to back the rare few low risk borrowers left. With so much potential for defaults and mistakes, failing to perform an annual credit report check is tantamount to financial suicide.
Repairing a credit report is a tactical process. Credit report agencies are, essentially, investment risk analysts. Those who understand that the financial services industry is as focused on profits as every other corporation in the marketplace are better able to polish their reports into sparkling demonstrations of future returns potential. Whilst credit scores that fall within the green zone are monetary gems for those seeking loans, lenders have more subjective ways of assessing your value as a debtor: When facing a consumer who feeds the maximum repayment amount into account monthly and one who pays the minimum, it is the latter client who will bring the highest profits through hiked interest rates over a longer term. The former consumer may have a credit report that gleams more brightly on the surface, yet many lenders are more enthusiastic about offering credit to the debtor who ends up paying more over the long term. With a view towards personal profitability, you can approach your annual credit report spring clean in a more strategic way.
1) An Eye for Detail
The simplest way to scour a credit report and nudge up your score is by combing through the seemingly minor details that are more easily changed over the short term. Voter’s roll, employment and residential history are all facets that draw the attention of lenders. Inaccurate information in these areas might be dragging your score into the red. Misattributed debt is not uncommon, but can be far more catastrophic than the omission of your last lease. Comparing addresses, names and dates of birth on credit file loans sometimes highlights the fact that someone else’s credit history has been added to your report. More sinister reasons for misattributed debt have emerged in the last decade, where identity thieves open accounts in others’ names and never pay them off. Reversing mistraces is not a simple process, but it is a life changing one. The consequences of such mistakes are dire, leading to impossible premiums, mortgage rejections and subprime products.
It is common practice for consumers to close accounts and consolidate debt as a way to clear up the muddy aspects of their credit reports, but it is not always efficient. Too many accounts do make a debtor undesirable, but some of those loans may be adding to your reputation. Closing an account that has been kept up to date erases all information attached to it from your report. By consolidating short term credit cards underneath accounts with timeous long term repayment histories, debt can be consolidated without losing the lofty scores that build your financial rank.
3) The Blank Slate
There is only one kind of credit report less attractive to lenders than those that are scarred and stained with unpaid loans and judgements: Reports that have no debt history whatsoever. If you have managed to go through life without making a single loan, you may feel proud of your financial past. Your credit score may even soar well above the green, but with no debt history, you are unlikely to receive loan approvals. Credit cards, retail accounts and mobile phone contracts help you to begin building your creditworthiness from scratch.