What are they saying about your credit?

Monday, February 21, 2005

By Matt Vande Bunte

The Grand Rapids Press



Scott Mazur was on a hunting trip several years ago when his wallet was stolen.



Stuck at deer camp with no telephone, the Rockford police lieutenant could not report the loss, which would have triggered a fraud alert on all his credit-card accounts.



Fraudulent use of your credit cards can have long-term financial ramifications, even if you were diligent in reporting them stolen.



Mazur tackled the problem head-on -- he obtained his personal credit report to make sure they accurately reflected his credit history -- and not the extravagant spending habits of a backwoods thief.



"I have a report done every year for my own protection," Mazur said of the credit reports. The typical fee for one is $10.



Starting March 1, credit reports can be obtained free -- courtesy Uncle Sam. It is one of the more visible components of the Fair and Accurate Credit Transactions Act signed into law by President George W. Bush last year.



Rockford's Police Department gets five to 10 complaints of identity fraud each year. But many more cases are undiscovered.



Eventually, the unsuspecting victim learns his or her credit has been ruined by a stranger. It does not have to be from a break-in, either. It could be from letters taken from your mailbox or a crumpled credit-card receipt tossed in a restaurant ash tray.



It may not be until you apply for a store credit card that you learn something is amiss.



With the new law, you can get a free report once every 12 months from each of the three national consumer credit-reporting agencies -- Equifax, Experian and TransUnion.



An annual review can save you a lot of aggravation, especially if your credit report is inaccurate, said Julie MacDougall, a counselor with GreenPath Debt Solutions in Grand Rapids.



"If there's an inaccuracy, you may not know, but you're going to get whacked," MacDougall said. "Is everything on there accurate? Is it yours? Do you recognize everything? Is it up to date?"



President Bush, in declaring Feb. 6-12 National Consumer Protection Week, called identity theft "one of the highest impact financial crimes in our nation."



"Identity theft can undermine the basic trust on which our economy depends," Bush said in the proclamation. "Identity theft can shake consumers' confidence, destroy a person's financial reputation, and damage lifelong efforts to build and maintain a good credit rating."



Michigan is one of 12 Midwest states where free reports will be available beginning March 1. The law went into effect for 13 Western states in December, and will trigger in June for residents in 11 Southern states. Eastern states and U.S. territories will be able to get free reports in September.



All you have to do is ask for it, either online at www.AnnualCreditReport.com or by phone at 877-322-8228. You also can fill out an online request form and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.





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A credit report contains a detailed history of your personal loans and credit accounts, which lenders use to assess the risk of loaning you money. It also gives a list of agencies that have received a report about your credit.



Such inquiries will increase if someone tries to get a credit card in your name. But don't expect credit agencies to tell you about the red flags, Mazur said.



"The credit agencies don't notify you just because there has been a lot of inquiries," Mazur said. "You could go two, three years, and you would have no idea someone is using your identity. Most people don't know until they apply for a loan."



Security fears aside, there are good financial reasons to take a look at your credit report. If you know you have lots of debt, it might be an emotional bummer, of course. But it also could be harmful to ignore an incorrect report.



Like a stone cast upon the water, a faulty credit report has a ripple effect on your every financial move.



Want a car loan? How about the interest rate on that loan; something competitive would be nice, right?



Bad credit scores can torpedo your chances of borrowing money. Even if you are approved, the interest rate likely will be higher than what a good credit score would bring.



The poor credit score that you knew nothing about affects what you pay for car insurance and, in some cases, can sabotage your job hunt.



MacDougall regularly has clients who have not seen their credit report in years. Once they do, clients find out why they cannot get a mortgage or why their auto insurance rates are soaring.





Source of contention



The source of a bad credit rating might be something you have overlooked or assumed was taken care of, MacDougall said. A good example, she said, are overdue medical bills you thought your health insurer paid. A slew of $50 co-pays can quickly bust your credit score, MacDougall said.



"It's not the balance. It doesn't have to be a big one," she said.



Other times, the credit report is not up-to-date. It can be hard to get a car loan when a lender thinks you are paying on three other cars and a boat.



And remember that loan you co-signed? Pulling a credit report "is how you find out your nephew isn't making his car payments," she said.



Because the new law permits you to get a free report from each of the three national agencies, you could either pull three reports at once or get a checkup every four months.



The advantage on the one hand is being able to compare the reports from different companies. On the other hand, it might be nice to have a continual checkup -- for free.



Either way, "you gotta know what's on there," MacDougall said.