Credit: Recommended Practices

Healthy-Paranoia
Credit Freeze Credit Lock Credit Monitoring Credit Repair MFA PII
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TL;DR

There are five US credit bureaus that collect and sell your credit information to others. They use your information to assign a score to you, and that score directly impacts your ability to acquire credit, the interest rates offered to you, and even where you can live. There are laws to help you manage your credit history, but it’s up to you to know what’s been collected about you, address inaccuracies, purge negative information, monitor for fraudulent activity, and limit access to the extent they offer you.

Terms & Tech

Your credit score is an algorithmically determined number based on your credit history. There are five important credit bureaus in the United States that collect and sell your history and/or score. Each of the three major bureaus have their own algorithm and numerical range for labeling your credit score as good or bad. Your score is generally determined by considering if you’ve ever applied for credit, e.g. a credit card or loan, how long you’ve had continuously held credit accounts, the number of accounts held, if you’ve ever made late payments, the ratio of how much credit has been extended to you compared to your income, and more. The credit bureaus sell this information to others so they can make decisions about you, such as whether or not to offer you credit or rent a place to live. A higher score indicates you’re a lower risk. A higher scope unlocks opportunity and saves you money because it can make you eligible for more competitive loan rates and better terms. It’s critical that you know what the credit bureaus think they know about you because it may or may not be correct. It’s just as critical to attempt to limit what they share and to whom by freezing or locking your credit history. You should make every effort to repair your credit, whether that’s resolving a reporting error or requesting derogatory information be removed.

Recommendations

  1. Annually baseline your credit history. You’re entitled to one free credit report annually and/or if you’ve been denied credit. Add an annual calendar reminder to check your credit from at least Equifax, Experian, and TransUnion.
  2. Address findings. The Fair Credit Reporting Act (15 U.S.C. § 1681) provides a framework for repairing your credit if your identity is stolen, if you want to try and have negative information removed, or if you find a mistake in your credit report. The process is:
    a. Request a free credit report from at least Equifax, Experian, and TransUnion.
    b. Contact each bureau to request they remove information. You can file electronically, call, or mail the request, BUT, it’s advised you don’t mail a letter like this because you risk putting tons of Personally Identifiable Information (PII) into the US Mail. Dispute data: Equifax or (800) 864-2978, Experian or (888) 397-3742, and TransUnion or (800) 916-8800. There are also templates you can leverage to help you write letters. The eforms website has excellent examples and you can compare them to others at nolo and imaxcredit. The eforms website also has additional steps you can take if the reporting organization provides information in time.
    c. Your credit history is compiled data from organizations with whom you’ve done business. Each bureau must contact the reporting organization for documentation when you request any data be removed. The entire window for resolution is 30 days, so this means from the moment the bureau receives your request, they have 30 days to contact and confirm details with the reporting organization and get back to you. Per law, the item must be removed if the reporting organization doesn’t respond in time or doesn’t respond at all.
  3. Monitor your credit activity and history. Credit bureaus and some third parties offer paid subscriptions to monitor your credit and alert you when there are changes. It’s important to understand that a change isn’t just opening or closing a credit card. Each bank submits data at least monthly to report your payment history, so consider your credit history a near-real-time report. Credit Monitoring is available for a fee or sometimes for free. Consider if credit monitoring is an investment you’d like to make. Just know some credit breaches might make free monitoring available to you. There are no drawbacks to subscribing to free credit monitoring from the three major bureaus. There may be an offer to opt-in to activity notifications such as when you lock or freeze your credit. One more critical point: the credit bureaus confirm your identity when you create your account by asking you to confirm things about your life. Other people may know these answers or be able to find them, so it’s important for you to claim your identity and create an account so no one else can. Be sure to use the strongest password and Multi-Factor Authentication (MFA) they offer.
  4. Lock or freeze your credit history. They both restrict access to your credit file and disallow opening new credit accounts. The US FTC says a freeze will “restrict access to your credit file, making it harder for identity thieves to open new accounts in your name” and freezes are free as required by US law. The difference? Each bureau offers this for a fee or for free. The free methods can be harder to locate, but know you can probably invoke the free method nearly instantaneously. Read each bureau’s fine print. What does this mean to you? Only unfreeze/unlock if you’re applying for a new credit account like a mortgage, line of credit, auto loan, credit card, etc. You may need to plan ahead and you may need to leave it unfrozen or unlocked for hours or days depending on the organization pulling the information. It’s not clear if home/apartment rental applications can access a frozen credit report, so don’t be surprised if you’re asked to unfreeze/unlock when applying for a new place to live. However, take no action until you know which bureau needs to be opened and how long they need to get the information.
    a. Equifax: Lock and Alert Credit Lock (free), Username & Password.
    b. Experian: Credit Freeze (free). Credit Lock (may or may not be free). Note: To find the button to freeze: you may have to revisit the site re-login. You may even need to call 888 EXPERIAN (888) 397-3742 to un/freeze. Details.
    c. TransUnion: TrueIdentity Credit Lock (free), Username & Password.
    d. Innovus: Credit Freeze (free), Online form (no Username & Password) - PIN to be mailed.
    e. ChexSystems: Credit Freeze (free), Online form (no Username & Password) - PIN to be mailed.
  5. Opt out of credit offers. Anyone with access to your mailbox and sometimes very limited information about you can fill out a credit application and have a credit card mailed. This might be mailed to your mailbox or maybe even somewhere else. When you decide you want a new credit card: research it and securely apply directly from the offering institution. You can opt-out for five years, mail a request, or permanently opt-out online.