Gather round, kiddies, I have a spooky tale to tell.
Lurking in the shadows, a trio of monsters is watching your every move. They know where you live and work. They follow you every day, patiently waiting for you to make just one mistake. And when you do, they make your life a living Hell for seven years.
Who are these beasts? Ghosts, perhaps? Goblins? The Cigarette-Smoking Man from the X-Files?
No. They are the national credit reporting bureaus.
Not scared? You should be, because these guys make Freddy Krueger look like the Avon Lady.
Locked in the databases of the three major national credit reporting bureaus -- Experian, Equifax and TransUnion -- lie detailed reports on each of us.
Like squirrels gathering nuts, credit agencies track down and list all kinds of information about you, including your name, current address, previous addresses, date of birth and Social Security number. They list mortgages, other loans and credit card accounts with credit limits, outstanding balances and payment history. They also list any bankruptcies, court judgments or liens against you.
Any slip up, from a late credit card payment to a lien against your house, shows up on these reports, usually for seven years.
So what does all this mean to you? Well, just about everything if you're looking to buy a car, purchase a home, get a credit car, rent an apartment -- or even apply for job.
When you apply for a loan or credit card, banks and other finance company purchase your credit report from one or more of the three credit reporting companies.
Your report is also available to landlords reviewing a rental application or employers conducting a background check -- although they have to get your approval before the credit agencies will sell them your credit report.
Credit reports become even more important for the gay community, since gays are more likely to be single. Couples -- gay or straight -- can usually get approved for a loan or apartment despite the poor credit of one person, so long as their partner looks financially solid. Singles have no backstop when it comes to credit reports.
Now, there may be some of you out there saying, "Okay, you've made your point, a good credit report is incredibly important. But I'm alright. I always pay my bills on time so I must have a pretty good credit. Why should I worry?"
If only life were so simple. You see, these credit reports have a little problem: They're wrong all the time.
The Federal Reserve Board of Governors released a study earlier this year indicating that 70 percent of almost 250,000 credit reports reviewed contained mistakes -- with nearly one-third of those errors so serious that they could lead to the denial of credit.
For those who think it won't happen to them, let me tell you a story. Many years ago, I applied for a store credit card -- mostly to save 15 percent on my purchase. A somewhat embarrassed clerk told me that I was turned down because my credit report showed a defaulted student loan.
Stunned, I told him that I had just mailed in my payment. Why would I make a payment on a defaulted loan? He said that he was sorry and suggested I check my credit report. I did just that and discovered that the clerk was indeed wrong. My report said that I had defaulted on not one but two student loans.
I spent the next six months fixing my report.
Surprisingly, I consider myself lucky. I was only applying for a store credit card, something I didn't actually need. What if I had been applying for a job or a loan to buy a car or house?
To save yourself from this nightmare scenario, financial experts recommend that you look at your credit report annually or three to six months before any major purchase to check for mistakes.
If you find an error on your report, follow these steps to repair the damage:
- Gather any documents you have to support your claim, and attach them to the letters you are going to send to the credit reporting agencies.
- Send a letter to each credit-reporting agency that is showing the error and explain what happened. You might consider sending the letters by certified mail, so you'll have proof of the dates they were received.
- If the credit reporting agency cannot verify the information within 30 days, federal law requires the agency to remove the item from your credit report.
- Finally, make sure you get a written report of the credit reporting agency's investigation and a copy of your report if the investigation results in a change. Federal law requires the agency to give this to you.
If you've made your case but the agency continues to refuses to correct the mistake, contact the Federal Trade Administration.