Credit report repair sample letter

Clean up credit before seeking loan

You should check your credit report with the same critical, impartial and dispassionate eyes that your lender will.

By the way, this column is not about creating a "new credit identity," or erasing or removing legitimate information about bankruptcies, judgments, liens or bad loans. There are companies that promise to do just that for you. There are also companies that promise to cure baldness.

Instead of offering empty promises and, at times, outright fraudulent advice, this column is about what you can realistically and legally do to improve your credit report by correcting mistakes that might be on it and explaining the legitimate bad marks that appear.

Before you do anything about your credit report, you have to get a copy of it. Do not assume that all three major credit-reporting agencies will have exactly the same information, or that all the information is correct.

Mistakes are common. After all, these agencies manage millions of credit files and process umpteen million bits of information a day-- and they accept whatever is sent to them. They do not check the accuracy of that information unless they are told something is incorrect and then they only check if the person complaining about a mistake follows the correct procedures.

Since you don't know which credit card reporting company--or companies--a lender will use, you should get copies from all three of them. They are:

* Equifax (800) 685-1111; www.equifax.com.

* Experian (888) 397-3742; experian.com.

* Trans Union (800) 888-4213; www.transunion.com.

There are several different ways to get your credit reports. You can buy each report individually from the recording agency, usually for about $10. If you go online you'll see that each company also offers the other two credit reports as well as its own in a package deal, so you can also get all three plus an analysis of your credit history for about $40. If you're married, you'll need your spouse's reports, too.

If you have been turned down for credit within the last 60 days, however, you are legally entitled to a free copy of the credit report on which the denial was based. The potential creditor must send you an official notice stating why your application was turned down and on what credit agency report that decision was based. There are instructions in the letter telling you how to get a free copy of your report from that agency.

All three credit reporting agencies will also tell you exactly what sort of changes you can have made in your credit reports--and unlike credit repair companies, they tell you this for free.

Once you have your credit reports, look for mistakes. Make sure you check each one separately. When you find mistakes you can either ignore or dispute them. If the error is minor--the wrong street address, for example--it's not worth fighting. Sometimes a negative item that should be there isn't.

You can dispute incorrect information online at the credit reporting agency's Web site, or you can do it by certified mail, return receipt requested. In either case, the letter should include three main components:

* Provide the full name of the company that made the mistake.

* Include the account number of the disputed claim.

* Describe why you are challenging the entry, e.g., it's not your account, it was paid, and so forth.

You are not required to send proof, but doing so can speed up and bolster your argument--a letter discharging the debt, a cancelled check proving payment, or anything that validates your claim. If you do send proof, do not send the originals. Send photocopies.

The credit reporting agency will then check your claim--and proof- -with the company that filed the disputed report. If that company cannot prove that you are in the wrong, the agency will change the report, and will do so within 30 days.

The Federal Trade Commission (FTC) spells out exactly what you can do and how to do it. You can call the FTC for information at (877) FTC-HELP, or you can get a sample letter online to copy or paste into your word processing program. Go to www.ftc.gov. Once there, follow these links: Consumer Protection, Credit, and How to Dispute Credit Report Errors.

If there is a legitimate black mark on the report, or if you lose your "dispute," that black mark will stay there, but you are entitled to have the credit report include your side of the story.

Perhaps you fell behind in your payments for several months because you were temporarily out of work, or there was a sickness in the family, or a bill was sent to the wrong address and you never received it.

In any case, your explanation will be included in your credit report, and it will be taken into consideration along with the black mark.

There is some work involved in correcting a credit report and it can take time, but it is worth it. Getting a mortgage at an interest rate that is 0.125 or 0.25 percent lower due to a better credit report can save you hundreds of dollars over just five or six years.

Spending time cleaning up your credit report makes sense, and doing so can save you dollars and cents.

Bill Steele is financial editor of Interest.com, a national publisher of mortgage rates and information.