Creepin' Credit Errors.

Here's what you can do when mistakes sneak up on you

IN MARCH 1999, EDWARD AND SYLATHIA JOHNSON WERE ELATED AS THEY WENT TO PARKWAY Mortgage Co. in Savannah, Georgia, to apply for financing of a new home. They had just settled on a charming, picturesque home in the Planter's Common subdivision on the southside of historic Savannah. The couple was bewildered when the loan officer informed them that only a few lenders were willing to underwrite the loan, and only for 80%, because of Edward's low credit rating.

"I went to meet with the loan officer as a result of that conversation. He went over the report with me, attempting to explain what we would need to do in order to bring my husband's credit ratings up," recalled Sylathia.

Edward's credit report reflected that a JC Penney credit card account, opened in 1997, was over the limit and that no one had made a single payment toward it. Likewise, a Capital One VISA account had never received a payment, since its inception in 1998, but carried a balance. Oddly, Edward's daughter's name appeared in the reference section of his credit report.

"Edward and I have been married for six and a half years and I have handled all of our bills the entire time," says Sylathia. "I told the loan officer that those were not his accounts and he suggested that I call the Merchant Credit Bureau in Savannah (used by a mortgage company to make rulings). [The bureau], in turn, referred me to the three main credit bureaus [to investigate] the discrepancies."

Sylathia sent letters to Experian (formerly TRW), Equifax, and TransUnion. Initially each agency incorrectly told her that the accounts were that of her husband. She then called JC.Penney to further contest the report. After locating the account number in the computer, JC Penney informed her that Edward's name and Social Security number did not appear on the account. Furthermore, after sending a letter to Capital One, they determined that it was not Edward's account either. In fact, both companies found that the accounts in question were that of Edward's daughter, and agreed to correct the inadvertent errors immediately.

"I knew that although my daughter's name was on the account, she did not try to use my Social Security number. There had to be a mistake," said Edward. "My daughter and I have the same last name, the same first two initials in our first names, similar Social Security numbers, and she lives at my former address with her mother. They told me that it was a human error. But that human mistake could hang my butt."

Many consumers assume that whatever appears on their credit report is accurate and precise. After all, your credit report determines whether or not you can purchase a new home or car and how low the interest rate will be. It can also determine whether or not you get that high-profile job in a sensitive career field or the best insurance rate possible. It determines whether or not you get a VISA card with a $300 credit line and a 21% interest rate or an American Express Gold with an unlimited credit line.

As with the Johnsons, it is a very bad idea to assume your credit is as it should be. There could be an unintentional mistake on the part of the credit reporting agency (CRA) or an information provider such as a credit card company. Student loan organizations or mortgage lenders may have records that reflect you still owe them, while you are certain that your bills have been paid. Your former spouse could have agreed to pay all of your joint debts in your divorce decree, but several years later you learn that one of the debts appears on your credit report. Or, worse, yet, you could be a victim of identity fraud if another person uses your Social Security number. We've polled several experts who offer tips on how you can protect yourself from credit foul-ups. Here's what they suggest:

GET A COPY OF YOUR CREDIT REPORT

All of our experts agree that, without a doubt, every consumer should order a copy of his or her credit report at least once a year. "Any consumer who is thinking of making a large purchase such as a home, car, or condominium should first get his or her credit report from all three major credit bureaus. The reason is [that each agency] may have different records and you don't know which [agency] a company will use," says Shirley Rooker, president of Call for Action, an international nonprofit network of consumer hotlines in Bethesda, Maryland.

You can call, write, or go online to order credit reports from the three major CRAs (see sidebar). These companies gather and sell data--which reveals information about your credit worthiness--to creditors, insurers, employers, and other businesses.

There is no charge for a credit report if you have been denied credit, insurance, or employment as a result of what your credit report reveals, or if you're the victim of identity theft. However, you must request your credit report within 60 days. Also, you are entitled to one free report a year if you receive welfare benefits, your report is inaccurate because of fraud, or if you are unemployed and plan to work within 60 days. Some states require credit bureaus to offer consumers a complimentary report, even if they are not denied credit. Other states charge up to $9.20 per report. When ordering a report, provide your full name, current address, previous address, spouse's name (if applicable), Social Security number, and date of birth.

ENSURE YOUR REPORT IS ACCURATE

Once you have received and reviewed your credit report, it is important to remember that regardless of what any credit report "doctors" or "clinics" may advertise, they cannot change correct information on your credit report--even if it is negative. Accurate, negative information (i.e., late payments) cannot be removed for seven years. It takes 10 years for bankruptcies. However, you have a right to correct and have complete information on your credit report under the Fair Credit Reporting Act (FCRA).

"If the information is incorrect, the first thing that you should do is request--in writing--an investigation. You can start with a phone call. But you want a paper trail. It is often more effective to put pen to paper," says Kathy McNally, vice president for National Financial Literacy for the National Foundation for Credit Counseling (NFCC), America's oldest and largest nonprofit organization dedicated to budget and credit education and counseling, in Silver Spring, Maryland. "You have to persevere. If you have canceled checks or a letter showing you paid off the loan, send copies of it. Once the incorrect information is removed, you, as a consumer, can request that the correct information be mailed to all creditors who had requested information in the last two years."

According to Experian, these errors can be the result of several factors: (1) the consumer payment history is reported incorrectly by an information or loan provider; (2) the consumer causes a mistake by using his or her name inconsistently (i.e., Bob or Robert) to obtain credit. "Use your full name written on your birth certificate all of the time," advises Rod Griffin, manager of consumer communication for Experian, base in Orange, California; (3) the consumer may provide an inaccurate Social Security number; (4) the consumer omits the Sr. and Jr. with father/son names.

It's the first issue that disturbs the Johnsons. "It really made me angry when I found out what happened," says Edward. "I was turned down for cars and furniture in the last few years and didn't know why. The [credit card company] admitted that it made a mistake. But playing with someone's life is a horrible mistake. I work every day to take care of my family and pay my bills. And what my credit report says, although I am a grown man, is that I am not a responsible adult. That is unfair."

When the erroneous accounts were removed from Edward's credit report in October 1999, his credit rating score went up and the loan was approved for 95%. "Consumers usually aren't interested in credit reports until there is a problem," says Griffin. Experian produces and distributes detailed consumer education information that discusses credit reports, important facts about cosigning for loans, credit card fraud, credit issues surrounding divorce, and everything else that is essential to protecting one's credit rating. According to Griffin, this process of educating consumers helps them to better manage their credit history and determine their credit worthiness.

GET ADDITIONAL ASSISTANCE

Some consumers are not as fortunate as the Johnsons, who had the credit card companies inform the credit bureau immediately of the mistake, and, in turn, had the credit bureau acknowledge the error and handle it expeditiously. Some information providers may refuse to change credit information that consumers say is incorrect.

"We will contact the lender to verify the information. They should respond within 30 days. If they do not respond, we delete the information. If they respond and say that the information is correct, we cannot change it," says Griffin. "We have to remain neutral. We will list both sides. The consumer can list a statement of dispute. Other than that, [any discrepancies] must be addressed with the lender."

With you and your lender in dispute, who are potential creditors likely to believe when reviewing your credit report? They may side with the previous lender. So what is your recourse when the previous lender has turned a deaf ear? If you think that you are being victimized, there are several national and nonprofit organizations willing to assist you.

* Federal Trade Commission (FTC) says that you have the right to sue a CRA or a provider of CRA data in state or federal court for most violations under the FCRA. If you are victorious, the defendant must pay damages and reimburse your attorney fees Although the FTC cannot act as your lawyer, its duty is to enforce the FCRA. Write them at Consumer Response Center, FCRA, Federal Trade Commission, 600 Pennsylvania Ave. N.W., Washington, D.C. 20580. Call 877-FTC-HELP or log on to www.ftc.gov.

* Call for Action resolves more than 90% of its cases. The confidential services are free to individuals and small businesses. In addition to its telephone volunteers, this powerful organization has media partners in radio and television that publicize consumers' concerns on the air. Call 301-657-8260 or visit www.callforaction.org.

"If you cannot resolve your problem with the credit bureau and creditor, contact Call for Action," says Rooker. "We will first verify the information that you have provided, evaluate the problem, and figure out the appropriate way to handle it. We will then contact the creditor on the consumer's behalf. Make sure you keep your records, receipts, canceled checks bills, and pay a few dollars for a credit report annually because you never know when debt can come back to haunt you."

* Council of Better Business Bureaus (CBBB) is the headquarters for 129 local Better Business Bureaus around the country, and can assist consumers as well. Call 703-276-0100 or log on to www.bbb.org. If you wish to lodge a complaint against a credit bureau or information provider, the council will refer you to a bureau in your area that will then record the information and get documentation from you. "We will contact [the credit bureau] within 10 days to notify them of the matter," says Ron Berry, senior vice president for the Council of Better Business Bureaus in Arlington, Virginia. "We will offer mediation or binding arbitration. It is a free service, and most complaints are resolved in 10 days. If telephone mediation is required, it could take up to 30 days, and up to 60 days for arbitration."

* National Foundation for Credit Counseling (NFCC) has about 1,500 counseling offices, and offers free or low cost services. Call 800-388-2227 or visit www.nfec.org. "If you really want to make sure that creditors are addressing your concerns, send e-mails, faxes, and letters as well as call. Be a strong advocate for yourself. Ask for a supervisor if needed," suggests McNally. "Be concise in what you are saying and attach supporting documents."

It is imperative that consumers are proactive to ensure that they are not a victim of incorrect and inaccurate credit information in the future. View your credit report carefully. And remember, "You have the right to challenge the creditor to show your proof of the debt. Show as much as you need to show to substantiate that it is not yours," says Berry. If you can get a company to support your claim, attach copies of the documentation from them along with the letter you send to the CBAs. As discussed previously, a person can steal your credit information or you may be the victim of a fraudulent company that has put information on your report without your knowledge.

SAFEGUARD YOUR CREDIT DURING DIVORCE

When Delores Cante applied for a Levitz Furniture charge card in March 1998 to purchase a chic living room suite, she was puzzled and devastated when her application was denied.

"I had just divorced and moved from Laurel, Maryland, to my present home in Tacoma, Washington, and needed furniture for my new place. I was surprised that I would be denied credit because having been in the banking industry for 13 years, I learned how to analyze credit reports and knew how to maintain a good credit rating. I have been explaining to individuals for years why their applications were not approved," says Cante, a credit analyst for Mutual Bank in Tacoma.

She contacted Equifax and the company mailed her a free copy of her credit report. The report revealed that a mere $69 dental bill from Dental Care of Laurel Lake was the sole hindrance to her getting a $1,300 credit line for furniture. "After our divorce, my ex-husband incurred this expense. Although it was listed in his name, the record contained my Social Security number and birth date. He has had a history of not paying his bills. Like all of his other bills, this one went to a collection [agency]. But I was held responsible for it."

Unlike with the Johnsons, it took Cante almost a year of battling with the dentist's office and the credit bureau to have the error removed. "As a result, I pull my credit report every year to make certain that my ex-husband's bills do not appear on my credit report again," says Cante. "I would advise everyone to know what is on their credit report. Just a small amount like $69 kept me from getting furniture. If you see something that does not belong to you, handle it right away. Stay on top of these companies. If you forget about it, they will too."

If you are considering divorce, it is important to know that your joint credit card contracts during your marriage supersede your divorce decree, Griffin says. Even if your divorce decree states that your spouse will pay all joint bills, it does not change your contract with the creditor. If your spouse doesn't pay, creditors can come after you legally.

Before your divorce, call all creditors and inquire about transferring joint accounts into the name of the responsible person. Try to close as many accounts as possible if the creditors are not willing to place the account in your spouse's name. If your accounts have balances that you can't pay off, consider getting an individual consolidation loan to pay off the balances in full and close the accounts. If you can't pay off the balances immediately, you can close the accounts to future charges, so additional debt is not incurred.

"Having errors appear on your credit report can happen to anyone no matter how diligent you are," says Berry. "Just make sure that you keep up with your accounts to ensure that you are not delinquent because [creditors] are not obligated to call and tell you what will appear on your credit report."

KEEP ON TOP OF YOUR CREDIT

"I think that consumers need to be really educated about their credit reports and should question their lenders when they are told about low credit ratings," says Sylathia. "I now know that we should check our credit report once a year. It is important to take action immediately and not wait around as we did. We were turned down before applying for the home and never knew or asked why."

Credit Reporting Agencies

* Experian (formerly TRW) P.O. Box 2104, Allen, TX 75013-2104, 888-EXPERIAN; www.experian.com

* Equifax, P.O. Box 105873, Atlanta, GA 30348, 800-997-2493, www.equifax.com

* TransUnion, P.O. Box 1000, Chester, PA 19022, 800-888-4213; www.tuc.com