Securing Your Credit

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Lock and Gold Coins

If you plan on applying for a new job or applying for a credit card, car or home loan, you may want to check your credit report first. A U.S. Public Interest Research Group report in 2004 found that one in four credit reports have serious errors that could significantly lower your chances of being approved.

Employers and potential creditors look at your credit report as an indication of your character and creditworthiness for short- and long-term loans such as a credit card, car loan or home loan. Even if you think you have good credit, begin the new year by checking the facts on your credit report anyway. Your credit report will outline your full credit history. And it can help you verify you have not been the victim of identity theft.

Establishing good credit or bad credit takes time, as does fixing errors that appear on your report. Discovering these problems while sitting in your bank’s loan office is no way to win.

An amendment to the Fair Credit Reporting Act and the Fair and Accurate Transfers Act (FACT) now requires each of the three consumer reporting agencies to provide you with a free copy of your credit report annually. To get a complete look at your credit report card, you’ll need to request a copy from each one: Equifax, TransUnion and Experian.

What is in my credit report?

Your credit report includes both personal and credit repayment history. Included in the personal information section is your name, address, Social Security number, current and previous addresses, and employment history. I recently checked my credit history and discovered that one of the digits of my Social Security number had been incorrectly entered on an account. It was listed as an SSN alias in the report.

The body of your report outlines your current lines of credit, your payment history and any potentially negative items such as companies that have denied your requests for credit. It also lists companies that have requested your credit history and any companies you have authorized to view your credit for business or insurance purposes. Review this information for accuracy.

How can I check my credit report for free?

To request your free credit reports, visit the central source for credit reporting at www.annualcreditreport.com. From that site, you can view a copy of your credit report from one or all of the bureaus. Or call toll-free at 1-877-FACT-ACT to request your free annual disclosure from the agencies. Your report will be mailed to you within 15 days.

For verification purposes, you will be asked a series of security questions. In my case, I was asked how much my mortgage payment was each month, what county I live in and the make and model of my car.

Beware of bogus credit companies claiming to offer free credit reports. Entering the wrong web address may land you at a bogus site claiming so-called free credit reports. These may be a trap to garner your personal information. Remember, there are only three official credit reporting agencies.

Each of the credit bureaus will try to sell you a detailed report. Some offer credit reporting packages for as little as $5.95 or as much as $68.70. You do not need to purchase these products. Proceed carefully on the websites, and click only on the free credit report offer.

How can I check my credit report regularly?

To get the maximum benefit, stagger when you check your free reports throughout the year. Your spouse is also entitled to free credit reports. By alternating with your spouse, you can check your shared credit every two months.

January: You request a report from TransUnion
March: Your spouse requests report from Equifax
May: You request a report from Experian
July: Your spouse requests a report from TransUnion
September: You request a report from Equifax
November: Your spouse requests a report from Experian

You can add a fraud alert message to your credit report to help protect your credit information. Fraud alert messages notify potential credit grantors to verify your identification before extending credit in your name in case someone is using your information without your consent. Review a copy of your personal credit report. If you believe that information in your credit report is inaccurate due to identity theft or fraud, contact the bureau at the phone number on your report for assistance from a representative specially trained in consumer credit fraud.

What should I do if I suspect someone has applied for something in my name?

Identity theft hits about 7% of households each year. If you receive any notice that someone has applied for something and you did not originate the application, you may be victim of an attempted identity theft.

The first step is to call the credit reporting companies and add a fraud alert to your credit information. Start by calling Equifax at 1-800-203-7843. Follow the prompts to have a fraud alert added to your credit information. If you are married, call separately for your spouse. They will ask you for your Social Security number, and they will offer to sell you credit monitoring services. Putting a fraud alert on is what’s important.

A fraud alert notifies potential credit grantors to verify your identification before extending credit in your name. This helps prevent your personal information being misused for the next 90 days. When you place a fraud alert with one credit bureau, they will notify the other two bureaus. For the next two years, your name will be removed from all preapproved credit and insurance offers.

At the end of 90 days, you can reactivate the fraud alert for an additional 90 days. If you can provide proof you have been the victim of fraud, you can put an extended fraud alert that will last for seven years.

Is there a way I can lock down my credit completely?

You can place a complete credit security freeze on your credit record. A credit freeze does everything a fraud alert does and more. First, it is permanent, not just for 90 days. Second, it prevents lenders from accessing your credit report entirely unless you specifically grant them access. This strategy prevents identity thieves from getting new credit in your name even if they have every bit of your personal information.

In some states, each credit bureau is allowed to charge a onetime $10 fee. If you have already been the victim of identity theft, the charge is waived. And some states do not allow agencies to charge for placing a security freeze. We recommend a credit freeze for people who have already established the credit they need. A freeze both reduces the frenzied marketing of additional credit opportunities and the potential harm of compromised personal information.

After a few minutes of effort and $30 in payments, your credit should be locked for life. Couples should lock down the credit file of each spouse. Here is how to accomplish securing your credit at each bureau:

-At Experian (888-397-3742), go to http://www.experian.com/consumer/security_freeze.html

-At TransUnion (888-909-8872), go to
http://www.transunion.com/personal-credit/credit-disputes/credit-freezes.page

-At Equifax (1-888-766-0008), you can put a lock on your credit by visiting https://www.freeze.equifax.com

The process is not standardized across the three credit bureaus. Each uses a different method. But with a little effort, your credit will be safe and secure.

Can I lift the credit freeze later if necessary?

Each bureau will give you a personal identification number (PIN). They are likely to be all different. Don’t lose these. Trying to get a security freeze lifted when you have forgotten the PIN necessary to change your credit security is a catch-22 you don’t want to experience.

If you do apply for additional credit, you will have to remove the freeze temporarily.

If you plan on applying for additional credit cards or getting a new cell phone provider or cable package, a credit freeze may not be advisable. And those promotions linked to new credit card applications will no longer flood your mailbox. But these deals are never a way to build real wealth anyway. Get the few credit cards you need, and don’t let any promotional offers suck you in.

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. Favorite number: e (2.7182818...)

2 Responses

  1. Jim Manning
    |

    I appreciate the information provided in this article However “locking down” your credit may be appropriate for some, but for the majority of North Americans this may not be practical. There are other ways to effectively protect your credit, and your good name!

    • David John Marotta
      |

      Greeting Jim,

      Help me out. I can’t think of a reason not to lock down your credit.

      You can always release your credit for any six weeks that you are applying for a new credit card, seeking a care loan, or refinancing a mortgage. But tell me why I want anyone to get my credit information just so that they can send me preapproved credit card offers or know that I have enough money for their direct mail marketing campaign?

      I’ve had my credit locked down for several years and have yet to experience why it isn’t a good idea.