Credit Ratings and Repair - Part 2

Dr. Boyce Watkins
www.BoyceWatkins.com

As part of our series on understanding credit scores, we can now move into more of the nitty gritty. Understanding credit is an important part of financial planning, and there are even more ways for you to be informed, empowered and financially independent. Below, I continue with my Q&A about credit scores. Hopefully, empowered with this new information, you can work your way to the wealth and financial security you deserve.

How are all of the factors weighted when determining your credit score?

As I mentioned in the prior article, there is no publicly released, verifiable formula for how the various factors in your profile go into defining your credit score. However, there are researchers like myself who spend all of our time learning how these things work. So, based on the existing data, here is one estimate of how aspects of your credit history go into determining your credit score.

35% - Your history of payment on debts from the past
30% - The amount of debt you have
15% - Length and depth of your credit history
10% - The amount of new credit you’ve applied for recently
10% - The type of credit you use (credit cards, student loans, etc.)

Again, while these numbers are not precise, the truth of the matter is that they are probably accurate in a general sense. Reducing your current debt and paying bills on time have been shown to be an important way to improve your credit score.

How do I correct an error on my credit report?


The law protects consumers who feel that their credit report has errors on it. Anything you believe to be inaccurate on your credit report can and should be disputed. You should dispute the information in a formal letter to the credit bureau, not in a phone call or even email. You want formal documentation of your challenge.

The Fair Credit Reporting Act states that any information disputed on your credit report must be verified by the credit bureau within 30 days. If they reach out to the company that claims you owe them money and don’t hear anything back, they must by law remove the negative information from your credit report. Use this vehicle to carefully check on any information in your credit report that you do not believe to be accurate.

When you write the letter, make sure you include the following information:

- Your full name
- Your social security number
- Your date of birth
- Your mailing address
- The name and account number for the debt you are disputing
- The reason you feel the debt is not accurate
- Your signature

Be sure to include all relevant information, because the law says that the bureaus do not have to respond to any disputes they consider to be frivolous (not without merit). You want them to take your dispute seriously.
Here are the addresses to the various credit bureaus:
Experian (formerly TRW)
http://www.experian.com
PO Box 2002
Allen, TX 75013-2002
888-397-3742

Equifax Credit Information Services
http://www.equifax.com
PO Box 105873
Atlanta, GA 30348
800-685-1111

Trans Union
http://www.transunion.com
Consumer Relations Center
PO Box 1000
Chester, PA 19022
800-888-4213 OR 440-779-7200


Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, CBS Sports, BET and USA Today. For more information, please visit www.DrBoyceFinance.com