It's a must to review credit

Robert Adams
Business First Correspondent
July 22, 2004

When a small-business owner recently applied for a mortgage to buy his dream home, he expected smooth sailing. After all, he had a stable job with a good income, little debt and had never fallen behind in payments on his credit cards or loans.

But the businessman hadn't bothered to order his credit report from one of the three national credit bureaus, explained Louisville CPA Kevin Judd, who encountered this case among his clients.

Unknown to the business owner, someone had used his personal information to open a credit card account and obtain several cell phones in his name. The scammer had run up thousands of dollars in bills, which were listed as past due accounts on his credit report.

Not surprisingly, the bank rejected the man's mortgage application, and he lost his dream home. He spent three years clearing up the credit mess, Judd said.

Identity theft is on the rise, according to Federal Trade Commission figures. The FTC, which is the primary U.S. agency for policing identity theft, recorded 1,332 complaints from victims of this crime in Kentucky in 2003. This is an increase from 923 complaints in 2002.

Taking preventive steps
The proliferation of identity theft is a cause for concern and the solution, say advisers, is to order a credit report once a year from the three major credit reporting bureaus and review each to verify all information is accurate. "Get all three bureaus' reports because they don't always resemble each other," Judd said.

The three agencies, Equifax, Experian and Trans Union, maintain records that show consumers' bill-paying habits and other personal and financial information. The cost of a report is about $9.

Reports offer detailed outlines
The meat of the report includes a detailed list of debts and itemizes late payments -- those that are more than 30 days past due.

The amount owed, the size of payments and the total credit available to the individual (i.e. credit card limits) also are listed.

Other information includes public records such as bankruptcy filings and liens on property, plus a list of who has made inquiries about that person's credit and a "score" that sums up the person's creditworthiness.

Factors beside someone's bill-paying history that determine that person's credit score include: length of credit history, amount of new credit, types of credit used, education level, number of years at a single address, number of years worked for a single employer, and home ownership.

Addressing, correcting mistakes
The federal Fair Credit Reporting Act provides procedures for correcting inaccurate information that can damage a consumer's credit.

"When you find incorrect information, you have to contact the agency in writing," said Jan Morris, a Louisville attorney who specializes in bankruptcy.

"When the agency is notified, it has to immediately contact the creditor, who has 30 days to get back to the agency. If there's no response from the creditor, the (negative) information can be deleted."

If the creditor disagrees with the consumer's contention, the consumer has the right to place a 200-word statement disputing the creditor's alleged debt in the credit report.

Some people who dispute information in their credit report hire an attorney to help clear up the discrepancy, said Julie O'Bryan, a Louisville bankruptcy attorney.

"You can do it on your own, but you really have to be persistent," O'Bryan said.

The credit report of an individual who has filed for bankruptcy should not include the amounts of old debts, O'Bryan said. These prior debts should be reflected as "included in bankruptcy" and carry a zero dollar amount, she said.

Consumers also should check their report before a major purchase, sources said.

Keeping an eye on the details
Lenders often provide better financing to borrowers with good credit scores.

"The sooner you look at the report, the more time you have to improve your credit information," said Kathy Virgallito, regional marketing manager for Consumer Credit Counseling Services of the Midwest in Columbus, Ohio.

Banks and other lenders realize that erroneous information can find its way into credit reports and are willing to work with borrowers experiencing such hassles, said Debra Stamper, general counsel for the Kentucky Bankers Association in Louisville.

"Banks are aware of problems with credit reports. They give borrowers a chance to correct errors. Mistakes happen."

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