The National Association of Consumer Advocates has
written a five-step guide to improving your credit score. The guide rather useful, in particular
because it defines terms and notations used on your credit report. It
also describes what your credit report really is--a document generated
on request that pulls data from a massive pool of consumer information.
Quite simply, your report doesn't exist on paper until it is pulled.
Then, an algorithm queries a database and pulls all of the data that is
supposed to be associated with your personally identifiable information.
This system naturally leads to some false positives. These false positives
can display on your credit report. If they are negative accounts, then
they can adversely affect your credit. You want your report to be 100%
accurate because it is used for more than just issuing credit. Although
some states are moving to eliminate the practice, some employers pull
your credit. If you want to rent an apartment or house, your credit may
While the NACA article is well-written and contains lots of great advice
and explanations of how credit reporting works, it does miss some very
1. How to submit a dispute.
NACA is correct; you should always dispute errors in writing. However,
NACA misses an important point: you should always include as much supporting
documentation for your dispute as possible. Was your debt discharged in
bankruptcy? You need to include your discharge order, the list of who
received that order, and the schedule from your bankruptcy petition that
lists the creditor. This way, if the report is not corrected, you can
easily build a case against the creditor, the reporting agency, or both.
The tendency is that these agencies don't do the required legwork.
Don't give them an excuse to label your dispute as frivolous or incomplete.
More information is always better here.
2. Don't close accounts
NACA does not touch on this point. Many people have a tendency to eliminate
old credit card accounts that they don't use. This can be a bad idea.
Part of your credit score is based on your debt load and credit utilitzation.
It depends who you ask, but keeping your debt load at 20-30% of your total
available credit can vastly improve your score.
While paying off a card and closing it out may feel good, it can also hurt
your score. Closing the account lowers your total available credit. If
the ratio of use to available credit changes too much, that 20% figure
could jump to 40% and hurt your score.
3. Follow up on both sides of the coin.
NACA alludes to this, but it cannot be restated enough: send your dispute
to both the reporting agency and the creditor. If the creditor is doing
things right and it's the agency that's the problem, contacting
the creditor can often help resolve the problem. If it doesn't, then
information gained from the creditor may be useful in pursuing a lawsuit
against the reporting agency.
4. Don't be afraid to sue.
Credit reporting agencies won't improve their processes and procedures
until we force them to do so. While the credit reporting agencies will
fight tooth and nail to avoid judgements being entered against them, they
won't get improve until it is cost-effective to do so. Given that
these companies have deep pockets and funds set aside for settling lawsuits,
it'll take a lot of settlements and jury awards to make it happen.
That process begins with you.