This New Year, Resolve To Improve Your Credit

Personal finance experts say the start of a new year is the perfect time to check your credit report. Host Michel Martin speaks with Tell Me More regular 'Money Coach' Alvin Hall about what to look for and how to boost your credit in 2012.

Copyright © 2011 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

MICHEL MARTIN, HOST:

I'm Michel Martin and this is TELL ME MORE from NPR News. Coming up, last week we told you about the electronic toys that might get you major mom or dad points, but today, we're going to talk about toys from back in the day, those classic toys that we think will earn some smiles. That's coming up.

But first, we want to talk about matters of personal finance and as we count down the rest of the year and prepare those New Year's resolutions, there's one that personal finance experts say you really should keep. Reviewing your credit report. They say you could be throwing money away just by failing to do that.

But what should you be looking for and, if you see a problem, how do you fix it? Who better to call to answer these questions than our money coach, Alvin Hall, our regular contributor on matters of personal finance and the economy. Welcome back, Alvin.

ALVIN HALL, BYLINE: Glad to be here.

MARTIN: So a few years ago, lawmakers paved the way for consumers to get a free copy of their credit report every year, but it's estimated that only about 40 percent of Americans actually do that, despite the fact that it's free.

Well, first of all, why should you do this?

HALL: You should do it because your credit report is the thing that companies use to give you credit, to judge your employability. Also, it determines the interest rates that you will pay on certain types of debt.

So if you want to have the lowest rate, you need to have a great credit rating, so you need to check it every year. Also, remember, people are handling these reports, so there's a human error factor built in. People could put the wrong name on it, especially if the name is very close together with somebody else's name. So all of this is important.

MARTIN: I think that a lot of people understand that, in the ideal world, you'd want your credit score to be as high as possible.

HALL: Yeah.

MARTIN: So the first question that we'd, you know, like to ask is what if you haven't done everything that you would like to have done. Let's say a lot of people have been using credit cards to kind of bridge some gaps because maybe they're underemployed, their hours have been cut and they've been using credit cards in ways that they had not been and/or maxed them out or the balances are higher than they should be.

Is there anything you can do about that? Is there anything you can do to kind of mitigate the effect of that?

HALL: Yes. There are some important things to do. The first thing you want to do is to look at the ratio of your indebtedness to your credit card's available credit. So if you have let's say a $10,000 credit line and you're up to $8,000, that will damage your credit rating and it will show up on your credit report.

So you want to pay down that debt so the percentage of your indebtedness is small relative to your available credit.

MARTIN: Well, what if you are having a problem with, say, keeping your hours up at work? Let's say you're like a lot of people who work in retail and, you know, your hours have been cut back? You know, even though it's the holiday season, you're just not working as many hours. What should you do?

HALL: I would move to a cash budget and then call up the credit card agencies and maybe try to negotiate a bit to move you to a credit card with a lower rate. It helps to be nice rather than belligerent in this situation. Yes, you're frustrated. Yes, you're angry and annoyed. But use kindness to try to get the customer service person on your side and, because all of these companies have varying rates on credit cards, maybe they'll move you to one with a lower credit card and will lower your payment.

MARTIN: Well, talk about being frustrated, angry and annoyed. What if your credit report is wrong and there are facts in there or there are statements in there that you know are not true? I don't know how many people have had this experience. I certainly have had the experience of calling someone and saying this is accurate. This is not accurate. And having some person on the other line say, oh, well, yes, it is. And you're like, excuse me. And you really want to jump through the phone and choke somebody. I mean, I'm sorry.

HALL: I know. I've been there.

MARTIN: What do you - I know you've been there. What do you do?

HALL: First of all, you have to write a letter to them. These days, everyone wants you to submit the letter at their website and it can be no more than 100 words or some limit like that. But writing always helps. Sometimes, talking to some of the customer service representatives is just not satisfying, because some of them will hear the tone of your voice or recognize that you're frustrated, or they're having a bad day and, therefore, it's taken out on you.

Always go in writing. Put it in writing and then create that paper trail. Most of these organizations do not like paper trails because it means, if things become very complicated or they end up in a class action lawsuit, you have evidence to show that you've actually written a letter and they did not do their jobs.

MARTIN: Is it easy to figure out to whom to write the letter?

HALL: It can be difficult. I wrote a letter to the president of the company when I did this. (Laughing)

MARTIN: How'd you figure out who the president of the company was?

HALL: On the website. I went to the website.

MARTIN: OK, OK.

HALL: Yeah. And I found out who the president of the company was and, much to my surprise - this was a while ago - I actually got a response. I think you just have to follow the procedure at first and then get a name. Call up on the phone and say, can I have the name of somebody I can write to? Do it nicely so they don't think you're being belligerent, but definitely get a name to write to.

MARTIN: If you just tuned in, this is TELL ME MORE from NPR News. I'm Michel Martin. We're speaking with Alvin Hall, our money coach, and we're talking about how to get a free credit report and why you should.

Do you feel that - or what does the data show about the success that people have with challenging these kinds of errors?

HALL: That's a very good question.

MARTIN: I mean, because one of the things I'll just say that I've found frustrating - and we should mention that there are three credit reporting agencies, not just one.

HALL: Yes.

MARTIN: So you have to check all three, not just one. One of the things I found frustrating is that somebody had clearly misappropriated my personal information - I still have no idea how - and had taken out an account in a city I had never lived in.

HALL: Yeah.

MARTIN: With, you know, buying a product I would never have bought. You know, that kind of business. And it took months to resolve and I was surprised. It would seem very obvious that this was not me, but you know. Do you have any sense of how likely is it that consumers can actually resolve errors without, you know, taking it up a notch or hiring a lawyer, for example, which is expensive?

HALL: Exactly. If you read the data that's compiled by the three credit reporting agencies - Transunion, Equifax and Experian - they say they have a high degree of resolving these conflicts. However, you talk to the general public and people, they say it's not true. So no one really knows what's accurate and inaccurate here.

I believe that the process is still too complicated and that the degree of skepticism involved by the people who work for these companies is unsettling when you call up about a complaint.

Let me talk about a situation in which I'm repeatedly involved in. I get a call all the time for somebody called Adele Hall. I am not Adele Hall, unless I have an alternate personality somewhere. Literally, every six months, this shows up on my credit rating. It's my phone number. It's not my address, but it shows up on my credit rating and I start to get phone calls from all of these companies offering to clear up my bad credit or to help me transfer my huge outstanding balances to another credit card.

MARTIN: Which are not yours.

HALL: Which are not mine at all. And even though I call about this all the time and I get it removed, somehow, it gets back on my report. I just now say, this is like being caught in the myth of Sisyphus. I have to push that big rock up that hill and then, once I think I've got it perched there and I walk away, it rolls back down and every six months, I have to start all over again.

MARTIN: So you keep, for example, a standard form letter...

HALL: Yup.

MARTIN: ...in your files.

HALL: In my files.

MARTIN: And you update it every time you get one of these and you just send them out?

HALL: Send it out again. I ask where can I fax the letter to? I said, I've faxed you this letter before. And they give me a fax number, or you can send it to the website. I send it to the website and it's removed from my record and, six months later, the phone rings - a 607 area code - I even know it now. And it goes, may I speak to Adele Hall? There's no Adele Hall at this phone number.

MARTIN: You know, it sounds to me that this really goes back to your core advice on most of these financial issues. You cannot afford to ignore this.

HALL: You cannot.

MARTIN: You don't want to. It's annoying. You have 17 things you'd rather do. But you must make yourself confront it, especially if you're right because the consequences are too high if you don't.

HALL: Exactly. Because, in this day and age, not only does it affect the interest that you pay on your mortgage loan or the credit card interest rates that are available to you, but also employers check your credit report before they hire you, before promotions. All of this is now part of the fabric to determine whether or not you are worthy for employment, worthy for the best deals.

So you need to clear this up, even though it's annoying and, sometimes, you want to jump through that phone and just do the worst thing to these people. But you have to be kind and you have to say, could you please help me resolve this? I would really appreciate your help in this matter.

MARTIN: Finally, a couple of housekeeping points here. Since there are three credit reporting agencies...

HALL: Yes.

MARTIN: ...is it the same process for getting a free credit report from each one? How do you do it?

HALL: It's now centralized. There is a website, AnnualCreditReport.com, to which people can write and they will get...

MARTIN: And that's free?

HALL: It's free. Absolutely free once a year.

MARTIN: So it's called - say it again.

HALL: And you get - it's AnnualCreditReport.com.

MARTIN: AnnualCreditReport.com.

HALL: Yeah. And you go to that website and you request it and you will get your report from all three agencies at one time rather than having to go to each one individually. It makes it a lot easier. You're entitled to one free credit report a year.

MARTIN: Alvin Hall is our regular contributor on matters of personal finance and the economy, our money coach, and he joined us from our bureau in New York. Alvin, thank you so much. Happy Holidays and here's to clean credit in the New Year.

HALL: Happy Holidays and to lower interest rates.

Copyright © 2011 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: