MICHEL MARTIN, HOST:
We're going to switch gears now and talk about matters of personal finance. A recent report from the Federal Trade Commission found that one in four consumers had errors in their credit reports. And that might seem like a minor inconvenience until you need to take out a loan or get a mortgage, when it could become a major headache. So we thought this would be a good time to talk with one of our regular money coaches about this and what to do about this. Louis Barajas is an author and personal finance counselor. Welcome back, thanks so much for joining us.
LOUIS BARAJAS: Thank you, Michel. How have you been?
MARTIN: Good. Now before we get started, let's make sure we have our terms right. What's the difference between a credit report and a credit score?
BARAJAS: Well, very different things. I mean, basically, what happens is that creditors like, for example, VISA, MasterCard, American Express, what they do is they will send information to the credit agencies and the credit agencies will then put together, based on your credit and what you've done and how you've paid your bills, will create a score for you. So they're two separate things.
MARTIN: Now, I'm sure that others have had this situation. You get a call from say, an agency, demanding that you pay a phone bill and you say well, what are you talking about, I'm talking to you so obviously my bill is paid. And then you dig deeper and find out that it's for a cell phone account, say in Texas, where you don't live, okay, which may be how most people find out about these things. What should happen then? I mean, what is the consequence of that? Because most people might say well, I've cleared that up, I've explained that that's not me, ignore it. Bad idea, good idea?
BARAJAS: Well, no, that's a - first of all, that's exactly what has happened to me. It happened to me, even though I'm a financial advisor. I had the exact same thing happen, it happens to at least, you know, tons of people a year. I think the FTC says - the Federal Trade Commission says that we have over 10 million victims a year. And so what you have to do is take care of that immediately and there's really, technically, four things that you have to do. And so - do you want me to go through those four things?
MARTIN: Yes, please. Let's find out.
BARAJAS: Okay, so the first thing is, you've got to alert your credit issuers and tell your bank immediately. So the problem is that most people if they - they'll steal their wallet, they'll steal their credit cards, and you don't have that information but that information, technically, is on the back of the card, for example. And so what happens - and they'll use that credit card to go get a phone and then put the bill on there, that's what happens. So one of the things you should do when you have - especially now or today, turn over the credit cards, write them down on a separate piece of paper, put them somewhere safely, just in case that you - your wallet is stolen and you have to call the credit card company so they can close those credit cards immediately and then they'll open up new ones for you.
MARTIN: Well, one of the things you were telling us about is that, a lot of times, people pay their bills by, maybe, putting the bill in their mailbox and letting the mail carrier pick it up. And you're saying, you know, bad idea. That sometimes people steal those bills to get that personal information.
BARAJAS: Yeah, it happens more than you think. And what happens is there are people out there who are just waiting for people to put their bills in their mailboxes, and somebody comes up and pulls them out and opens them up and they've got your - all of your information and they've got not only that, but if you're paying by check these days, they've got your bank routing number, they've got your bank account number, they've got your name. All they need to do is to somehow figure out how to take your Social Security number. You know, and Michel...
MARTIN: Well, one of the things you were also telling us is that it's very important to check your credit reports annually. At least annually.
BARAJAS: Absolutely, absolutely.
MARTIN: How do you do that?
BARAJAS: Yeah, and most people don't even know that they can get that free.
MARTIN: How do you that?
BARAJAS: Okay, well, what you should do is go to www.annualcreditreport.com and you can actually get a credit report for each of the three major credit agencies, which is Equifax, Experian, and TransUnion. And you can review your credit report and take a look at it and see if there's anything on there that looks suspicious or doesn't look right. Or maybe one of the credit card companies reported something wrong or maybe a mortgage company reported something that was late that really wasn't late, and you can catch that and you can fix that.
MARTIN: And fix that how? Like, what do you do? I mean, I think a lot of people talk about just the nightmare of having to spend hours writing letters. Is it that hard? Is it that bad?
BARAJAS: It can be bad and, again, if it's just fixing a mistake, it's not a big deal. But if it's something where there's been identity fraud, it can actually take a long time but you have to keep at it, because what's going to happen is, if it's wrong, it's going to affect your credit score.
And remember, your credit score is going to affect the potential for you when you go out and get a new home loan or refinancing your mortgage or buying a car, you know, it affects all of that. So you have to stay on top of it. But what you should do is - if someone has actually stolen your credit, you should also file a police report, Michel. You have to go to the local authorities, file a police report, and then get a copy of that report and send it to the creditors and the credit agencies.
MARTIN: How would you know, though, if your identity has been stolen? I mean, for example, I had the experience once of going on a business trip. The one place I used my credit card was the hotel to check-in, 'cause everything else was kind of covered, I was at a conference. And then two months later I find out that somebody has used my number to buy camera equipment in that same city where I had not been since. I'm like - that's the only way I found out. How would you find out?
BARAJAS: Right. Well, you know, it's, again, it's being very vigilant and monitoring your credit card statements, your bank account statements. I mean, that's how you're going to find out immediately. What most people do when they catch it right away is that they've got online banking or they're actually taking a look at their credit card bills through online and they don't have to wait an entire month. Because what'll happen is, let's say that I take your identity and go out and buy a computer with your information. And if you're not going to take a look at your monthly statement 'til maybe about a couple weeks after it gets there, it's already been six weeks.
MARTIN: So stay on it. Gotta - do not ignore it. Louis Barajas was with us from Irvine, California. Louis, thanks so much for joining us.
BARAJAS: Michel, thank you always.
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