It might be time to check your credit report. A study by the Federal Trade Commission earlier this year found that one in five consumers had errors on their credit reports that could result in less favorable terms for loans.
"A lot of people have checked it at some point, but it's not part of the regular regime," says Liz Weston, a personal finance expert. "It's like flossing. You know you should do it, but you kind of can't get around to it."
Your credit report is based on the bill payments you have missed or paid late, loans that you have paid off, plus your current amount of debt. It contains information about where you work and live, how you pay your bills, and data on whether you've been sued, arrested, or filed for bankruptcy. Agencies, like the major credit bureaus, gather this information and sell it to creditors, employers, insurers, and others.
Where should you go if you want to check your report?
The one and only place to get your free annual credit reports: AnnualCreditReport.com.
"A lot of people get misled by look-alike sites or they put that address into a search engine rather than right into the URL bar and what happens is they get sidetracked to a site that's not the real deal. So you want to go type it in: AnnualCreditReport.com. That's where you will find your three credit reports from the three different credit bureaus," says Weston.
Why are there three credit bureaus?
Weston says consumers should remember that the credit bureaus are not federal agencies. They are private businesses and there are many credit reporting agencies -- but the three bureaus are the largest.
The three major national credit bureaus are:
Is your credit report the same as your credit score?
No. Your credit report is different from your credit score. Your credit report is a record of your debt history. It contains information about your credit history and the status of your credit accounts. Your credit score is a numerical value calculated from information that's found in your credit file. It's used to predict your creditworthiness -- how likely you are to do things like repay a loan or make payments on time.
Weston says you don't necessarily have a federal right to look at your credit score. Unlike your credit report, which you can get at no cost to you annually for free at AnnualCreditReport.com, you usually have to pay for your credit score. If you want to see your credit score you should go to the website: MyFico.com, the only site that has the FICO scores that lenders use.
What should you do if you find a mistake?
"First try to do an assessment of how serious this is. I mean, if you look at your credit report and they have your old employer listed or they have an old address listed rather than you present one. I mean, you can go ahead and get that corrected. Is it worth the effort? I don't particularly think so. What you want to look for are serious errors, like accounts that aren't yours or a collection that isn't yours or an account reporting that you paid late when you didn't. All those things can seriously hurt your credit score," says Weston.
You should also look at things that can indicate identity theft, such as an address you’ve never lived at. As far as inquiries on your report, Weston says that while you should check them out, they're less of a concern than information that isn't correct and shouldn't be on there.
How can you correct errors?
"When you're online you will see a button where you can dispute these things. If you don't see it, then click on the actual item itself. Delve in a little bit deeper and it should pop up. All the bureaus have a way for you to dispute it online. We used to say, do this all in writing and that's certainly something you can do, but it might be quicker to start on the website itself," says Weston.
Weston says consumers should be aware that this process might not work. If it doesn't work, you might have to write everything down and send it via certified mail just to get a paper trail going.How to dispute a credit report error
The Federal Trade Commission released a report saying that 42 million consumers have at least one "potentially material error" in their credit reports.
Who else can help?
These days there are allies for consumers who need help. If you're having trouble fixing an error -- even after you've followed the law, appealed to the creditor, and done everything you can -- you can send a complaint to the Consumer Financial Protection Bureau. What might work best, Weston say, is hiring a lawyer who understands consumer credit law. You can find one at the National Association of Consumer Advocates.
"You don't necessarily want to go to a credit repair firm that's advertising itself on the Internet," says Weston. "On the same token, most people don't need to hire help to fix these things. A lot of the errors are fairly minor, you can take care of them yourself."
We here at Marketplace Money pride ourselves on helping everyday Americans take control of their personal finances.
Hopefully you've learned a thing or two by listening to our program -- just as we've learned a lot by hearing from you.
In fact, we think there's so much helpful, financial knowledge in our collective memory banks, that we could share some of that personal finance know-how and financial literacy with Washington lawmakers as they seem to need a little help right now.
Without further ado, here are seven lessons we've learned together (with a little visual help from Hollywood) that might help our government out -- GIFs included just for fun:
1. How to pay off debt
Whether it's your credit card, student loans or mortgage -- millions of Americans are in debt. To pay that debt down, financial experts say you need to be on a payment plan. It's gratifying for us to hear from listeners who have managed to ditch their debt. We're hoping America is able to start doing the same.
This past April, the U.S. paid down its debt for the first time in six years. And as of September 24, America's total outstanding public debt was $16,738,183,526,697.32. (That's in the trillions, if you're confused because there are so many digits.)
We're hoping our nation's lawmakers can find a way to pay off its debt and get on a payment plan. We can put them in touch with some good financial planners.
2. How to build an emergency fund
No matter how much you make or how well you plan, bad things can and do happen. We've talked to people dealing with all sorts of emergencies, including a lost job or unexpected health care bills. So having a solid emergency fund is essential.
But a lot of folks also have debt to pay off. Almost everyone, at some point, faces that question of whether to pay down debt or save for an emergency fund.
In order to make an informed choice, you have to set your priorities and understand the consequences to your options. Financial experts say an emergency fund should cover three to nine months' worth of your living expenses.
So keep plugging away and adding as much as you can to your rainy day fund. You'll set a good example for your loved ones -- and hopefully America, too.
3. How to live within your means
Financial experts say don't borrow more than you need. You know, that whole 'live within your means' thing? Sounds simple, right?
Sometimes it's simpler said than done -- there are credit cards, after all. In the case of the government, the U.S. borrows cash by issuing government securities, purchased by other nations and institutions. So while a lot of America's national debt is owned mostly in the U.S., other economies hold some of our debt.
As of July 2013, here are the top foreign holders of Treasury securities:
- China $1277.3 billion
- Japan $1135.4 billion
- Caribbean banking centers* $287.7 billion
- Oil exporters* $257.78 billion
- Brazil $256.4 billion
- Taiwan $185.8 billion
- Switzerland $178.2 billion
- Belgium $167.7 billion
- United Kingdom $156.9 billion
- Luxembourg $146.8 billion
* Caribbean Banking Centers include Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Netherlands Antilles and Panama.
* Oil exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria.
4. How to stay on budget
Many Americans face a challenge in managing the money they make and the money they spend. The solution is to make a budget. We know creating a budget and sticking to it can be difficult. But we've also learned that you've got to do it.
Creating a realistic and sound budget plan will help you achieve your financial goals. And one lesson you've hopefully learned by listening to Marketplace Money is identifying where the cash leaks are and plugging them up.
Now, we know that the federal budget is incredibly complicated. It's different from a household budget in many ways. For an individual, or family, the budget includes things like housing, food, and transportation. But government spending priorities are very different.
Take defense spending, for instance, which takes up about 20 percent of the national budget. That's not really in a household budget. So while we can't really compare a household budget to the federal budget, we can impart this lesson to our elected officials: budgeting is essential.
Find a way to cut the fat, folks!
5. How to determine a need vs. a want
Here's a very basic personal finance lesson most of us learn growing up: Distinguishing between needs and wants. Needs are things we really can't live without. Wants are things we'd like to have, but even if we don't have them, we'll survive (although some people fight that logic and wind up going bankrupt by spending $100,000 on Beanie Babies).
We know that politicians spend a lot of time talking about cutting down on government waste. But one man's waste is another man's want is another man's need. It's all relative. Each of us has to design a system to sensibly justify and prioritize our purchases -- and the government shouldn't be exempt from that.
6. How to find a good financial planner
Any Marketplace Money listener knows that finding a good financial planner you can trust is invaluable. A good financial planner can help you achieve your financial goals and manage your money.
Some might say America's financial planners are a combination of the Federal Reserve Chair and the Treasury Secretary. The Fed’s moves -- changing expectations for inflation and interest rates -- have a big impact on your wallet. While the Treasury Department provides economic advice to the president and promotes economic growth through policies to support job creation, investment, and economic stability.
Both play a key role in protecting the U.S. economy. But you may have heard recently, there's been some drama trying to find a replacement for current Fed Chairman Ben Bernanke. Skip the drama and secure a sound financial planner to protect your dollars.
7. How to communicate about money
This final lesson is of particular importance to the people who produce Marketplace Money. Each week, brave listeners volunteer to share their personal stories about the trials, tribulations and triumphs they've had involving a very intimate topic: Money.
Their willingness to openly share their experiences is what drives our show. As much as there is to learn from the wonderful experts we have on the program, the biggest takeaway comes from the real-life tales of people who share their stories.
And we know that communicating with others about money is tough. We get that.A lot of people don't like to talk about it at all.
But when you are charged with making financial decisions, you have to have honest conversations about how to accomplish shared goals. Today's government shutdown is proof of that. So here's a message to Washington: Instead of making threats and hurling ultimatums, sit down and talk things over sensibly next time.
And if you need some inspiration, have a listen to Marketplace Money.
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