Negative Items on Credit Reports: Check and Challenge

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Is this fair? A man’s credit report states that his current use of a credit card is $2,500, and also scores this amount as his maximum. He gets a negative point. In fact, however, his available credit actually is $10,000 and he is using only ¼ of the total available credit. This is a good thing and definitely not reason for a negative. Unfair as it may be, many credit card companies refuse to tell credit-reporting agencies what your available credit is, and the result is your inability to secure new credit.

Is this fair? A woman gets one credit report from Major Agency X: her score is 500. She pulls her other report from Major Agency Y: the score there is 800. She faces a difficult choice, especially if she currently is seeking credit.

Both of these examples raise major arguments about what is fair and what is not when it comes to credit. Unfortunately, very few consumers receive real information about how their credit scores are used against them, and how credit scores can be altered. Consumers should spend more time and effort improving their understanding and working on their credit, because so much of this “unfairness” results from credit scoring (regardless of the actual score). This article is a launching point for learning about negative scoring and how points are taken away from one’s credit score.

It is relatively easy to explain how your score is raised, but is more difficult to explain how your score can be dragged down. Positive scores are built by consistently paying bills on time. Scores also reflect how much money is owed in relation to the amount of credit available. Unfortunately, negatives seem to do more harm than positives help a score.

There are many misconceptions about which aspects of one’s finances are important to credit scores. While the following variables will not affect your actual score, your age, how long you have held your job, education, residence (including owning versus renting), and having been turned down for credit will affect your overall report. That’s right: being turned down for credit does not hurt your score. It is not important whether or not you have been approved for requested credit, but rather how many times in a given period your credit has been requested. Too many inquiries indicate an inability to afford credit, and because credit means risk, you will find it difficult to be allowed to put someone else’s money at risk.

You should approach negative credit marks armed with a calendar and a plan. You have an absolute right to challenge items on your report, and since negative items remain on your report for at least seven years (some items may stay 10 years), you better get started. Unchallenged, these items will become unwanted house guests. First things first, obtain your credit reports.

• Ask for your free report from each agency at least once every 12 months.
• Challenge with separate letters of inquiry the weakest and oldest (+2 years) negative items.
• Revisit the issue nine months later, and repeat the process.

If you apply for credit and are denied, you automatically are entitled to a free copy of your credit report to determine why you were not approved. Also, if you are on welfare or will attest to unemployment, the law allows you to get a report for free.

The most intuitive way to balance negatives on your report is to add positives. Many sources (companies) actually do not participate in credit reporting, because it is time-consuming and costly. Interestingly, for example, many credit unions do not rely on national credit reporting. The good news for consumers trying to balance off negatives with positives is that it is possible to add some unreported positive items to your credit report, although it may cost a fee to do so.

If you regularly check and challenge your report, the results you incur will make it all worthwhile.

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