Personal Credit

  
  Your credit history and score are maintained by three major credit bureaus: Equifax, Experian, and TransUnion. The information in each is used to calculate your overall credit GPA (FICO score). Most lenders don't care about the details of your credit report. They just want your overall score. However, you should care about your report. If you want to raise your overall credit GPA, you'll need to use your credit reports (all three) to get to the bottom of the problem.
 
     
 

Your credit report card

 
  The three credit-reporting agencies keep tabs on various accounts -- past and present -- opened in your name, including credit cards, bank credit lines, mortgages, department store charge cards, and other bills (though usually not rent payments or utilities).  
  Your credit report also includes any collection actions taken against you and any public-record information that may exist, such as liens or bankruptcy proceedings, or how often you floss and if you returned that book of Poe poems you checked out in the third grade. (Okay, we're exaggerating a little bit on that last one.)  
  In general, reported data falls into four categories:  
  Personal information -- Past home addresses and some employment history, in addition to the obvious stuff like name, address, and Social Security number.

 
  Credit history -- Open credit lines and installment loans, plus a record of all late payments (30 days or more) to anyone -- from phone company to mortgage holder.

 
  Public records -- Bankruptcies and other court judgments, like alimony agreements and tax liens.

 
  Inquiries -- A dated listing of all recent business requests to see your file. Requests by you to see your own credit file are not recorded or counted.  
  Whenever you apply for a loan, or even at other times, the lender requests a copy of your credit report from one of the three major credit-reporting agencies. Based on that, your FICO score is calculated. Again, your overall score weighs heavily in a lender's decision. Though depending on the type of credit you are requesting, the lender may also look at your income, length of employment, and if your shoes match.
 
  To make things confusing (shocker, we know), the three credit bureaus don't necessarily have the same information (and don't necessarily use the FICO method). So depending on which reporting agency your lender uses, your credit score might be different.
 
  Whatever judgment is passed down upon you by The Great and Wise Credit Scorers, take comfort in the fact that you have unprecedented access to their oracle (the FICO scorecard) and have the power to change your score./td>  
     
 

Six Tips for Establishing Good Credit

  
  Even if you're a confirmed rebel, try to be as "normal" as possible in your consumer credit habits, especially if you expect to borrow for a house some day. Instead, channel all your anti-establishment efforts towards clothes, music, and body piercings. Here are six small ways to keep your credit record clean:
  
  Pay your bills on time/strong>,, especially mortgage or rent payments. Apart from extreme circumstances like bankruptcy or tax liens, nothing has as big of an impact on your credit history as late payments.
 
  Establish credit early./strong> Having clean, active charge accounts established many years ago will boost your score. If you are averse to credit, on principle, consider setting up automatic monthly payments for, say, utilities and phone on a credit card account and locking the card away where it's not a temptation.

 
  Don't max out available credit on credit card accounts./strong> Lenders won't be impressed. Instead, they are much more likely to assume that you have trouble managing Who cares about your credit & 
  Who cares about your credit? You might be surprised. Get the lowdown on your credit karma and how to improve your lot in the lending world./font>  
   
   
   
  Get the Facts  
  What's Your Credit Karma?
Your financial life can be boiled down to three magic numbers. Go ahead and take a peek. 		 
  How Lenders Keep Score
Here's the magic formula that determines how lenders look at you. 		 
  When to Care About Your Credit
What you don't know can hurt you -- in some instances more than others. 		 
  Anatomy of a Credit Report
A guide to all the pieces and parts of your credit report card. 		 
  Fixing the Boo Boos
Triage for everything from self-inflicted credit blunders to outright lies. 		 
  Attacking Identity Theft
What you can do to protect your good name. 		 
 

What's Your Credit Karma?

  
  It's more popular than a report card and has more impact on your life than your GPA ever will. It's your credit score -- the closest thing to a financial report card there is. Here's what it is and why it matters./span>  
  Are you a 768? An 820? A 362 (gasp!)? A short time ago, you would have had no way to answer the ever-elusive question (and painfully unpopular pick-up line): "So, what's your credit score?"  
  Your credit score -- or, more accurately, your FICO score -- used to be a top-secret number known only to lending professionals. In March of 2001, the veil of credit-scoring secrecy was lifted. Now with just a click, you can see the three magic digits -- based on a formula developed by Fair, Isaac & Co. -- that define your credit-worthiness. Your number can range from 300 to 850. Anything above 720 is considered average.  
  Ho-hum. Big deal.  
  Well, it might be a big deal for you. The lending industry uses your credit score for a quick, objective assessment of consumer credit risk. (That's "credit trustworthiness," or "credit karma," in plain Fool-speak.) In some instances, this single measure can determine your fate in important matters -- whether you get a loan for that new home or car and at what interest rate, or if you qualify for the Puppy Palace Angora Visa for 10% off your first Bijon Frisse. For others, it matters not a bit. (For now, at least.)  
  The higher the score, the better the chance your request will be approved. According to Fair, Isaac, the FICO score is used in 75% of residential mortgage applications.
 
     
 

Credit score vs. credit report

 
  Your credit score is simply a snapshot of your credit use -- it's the Cliffs Notes version of seven years of your borrowing history. In many lending situations (such as when you apply for that Angora Visa card), the lender bases its decision almost solely on your credit score. (Most use the score calculated by Fair, Isaac, the most popular of the credit scorers.) Consider your credit score the overall GPA of your borrowing history.  
  Your credit report is the detailed rundown of your borrowing habits. Credit reports your finances. Beyond one or two credit cards, it starts to get complicated.
 		  
  Don't apply for too much credit in a short amount of time/strong>. Multiple requests for your credit history (not including requests by you to check your file) will reduce your score. If you are hunting around for good loan rates, assume that every time you give your Social Security number to a lender or credit card company, they will order a credit history.
 		  
  Be neat and consistent when filling out credit applications./strong> This will insure that all your good deeds get recorded in a single file, as opposed to multiple files or, worse, someone else's file. Watch out for inconsistencies in use of "Jr." and "Sr." If it gets ugly, remind dad that he already has his house.

 		 
  Check your credit history for errors, especially if you will soon be requesting a time-dependent loan, like a mortgage.  
     
 

How Lenders Keep Score

  
  One false move can follow you around for seven years. Here's how your credit score is calculated. /span>  
  Sure, declaring bankruptcy and entering the witness protection program can have an adverse effect on your credit score. But even little things can have a big impact on how lenders look at you.  
  There are five major areas upon which you're being judged. (Sit up straight as we list them.) They are:  
  1. Past payment history. Your payment punctuality weighs heavily (about 35%) on your credit score. The more recent your tardiness, the more points you sacrifice. Your credit report will indicate whether you are 30, 60, or 90 days or more late with a payment. A history of late payments on several accounts will cause more damage than late payments on a single account. On the flip side, by paying your bills consistently on time, you can greatly improve your overall score.  
  2. Amounts owed. Add up all of your outstanding balances and compare the number to the amount of credit that is available to you. If you are reaching -- or exceeding -- your credit limits (perhaps you've heard the term).  
 

3. Length of credit history. Fifteen percent of your credit score is determined by how long you've been using credit. Obviously, the longer your credit history, the more favorable lenders will see you. Your score in this area also takes into account how long it has been since you used certain accounts. So just having an idle card for 10 years won't necessarily raise your score. Don't open a lot of new accounts at once to establish a credit history. That strategy will lower the "average account age" on your score, which could affect your score negatively.

 
  4. Amount of new credit. Each time you apply for new credit, an inquiry shows up on your report. Red flags start waving when you take on more credit -- or even just apply for new credit -- in a short period of time. This is one area where good habits can work against you. If you prove yourself a reliable bill payer, charge card issuers will be quick to offer additional credit.  
  Future lenders, however, may not take kindly to all this readily available credit. Some fear you will use it to go on a spending binge, quickly undermining standard calculations for determining how much additional debt you can shoulder. This area of credit management carries a 10% weight on your overall credit score.  
  When you shop for new credit (such as a home loan), try to do so in a concentrated period of time. FICO distinguishes a search for a single loan and requests for many new credit lines. (Note that requesting a copy of your own credit report does not affect your score.) If you've had trouble with this area in the past, you can boost your score by re-establishing credit (not too much credit, though!) and making on-time payments.  
  5. Types of credit.. Types of credit include credit cards, retail accounts, and installment loans (like car loans and mortgages). Your use -- or over-use -- of these has a 10% impact on your overall score. Though you may be tempted to show what a good borrower you are by using all types of credit, more is not always better in the eyes of credit scorers. If you have had no credit, lenders will consider you a higher risk than someone who has managed credit cards responsibly.
  
     
 

Let's pretend

 
  What happens to your credit score when you max out or miss a payment, or even pay your balance in full? Using a baseline FICO score of 707 (considered "good" by most lenders) we consulted the to find out. (Scroll down a little on this page to get to it.)/td>  
  Scenario 1: You pay all your bills on time every month. Paying on time can up your score to 727. According to FICO, more than 68% of the U.S. population did not miss a single credit payment in the recent past. In other words, it pays to be punctual.  
  Scenario 2: You space out and forget to pay all your bills every month. Watch your score go from 707 down to as much as 582. Yipes! If you tend to be forgetful, you may want to set up automatic bill pay -- at least for your credit cards and other loans. Nearly one-third of the borrowing public has evidence of serious delinquency information reported on their credit file.  
  Scenario 3: Feeling generous, you pay down about one-third of your outstanding balances.   Sorry, that's not going to have as big of an impact as you might think. Your score will hover in the 707 to 727 range. The national average of total amount owed on non-mortgage-related credit obligations by U.S. consumers is around $11,000. Still, that doesn't factor in the exorbitant interest being paid for the borrowing privilege.  
  Scenario 4: You go on a spending bender and max out all your cards.   That'll hit you where it counts -- in your wallet and in your credit score, which could dip down into the 630s.  
  Scenario 5: You apply for and receive a $3,000 line of credit. All other factors being "normal," this won't affect your score too much (it'll fall somewhere between 697 and 717). For the average consumer, the most recent account opening was 20 months ago.  
  Scenario 6: You transfer a $5,000 balance to a lower-interest card. Good for you, if you're doing so to pay off your debt more quickly. In the long term, this move will pay off in spades. In the eyes of FICO, it doesn't much matter, though, since you still owe the same amount of money, regardless of what account you moved it to. In this case, your score will be anywhere from 692 to 722.  
  See what lenders think about you by checking your FICO score. You'll have to fork over $12.95, but if you're going to apply for a loans sometime soon, it's worth it.  
     
 

When to Care About Your Credit

  
  Shopping for a home or school loan? Been denied credit? Just curious about how the financial world judges you? All are great reasons to check up on your credit./b>  
  How often should you check up on your credit? You'll read "once a year" in a lot of places. Certainly, more often than that is overkill for most people.  
  Still, the best answer for any individual will depend on a number of personal and financial variables. What are your future borrowing needs? How much capital do you have at risk? What's your current credit exposure? How much can you tolerate the unknown?  
  See if you identify with any of the following situations, then use it to base your credit-checking behavior.  
  I have not recently been denied credit and I have no near-term plans to borrow or open a credit card account.  
  Well, aren't you a goody-two-shoes? (We only jest because we're jealous.) Seriously, though, what you don't know can hurt you. It can take a while to clean up mistakes or establish credit if you need to. So if home-buying plans are on the horizon (even within a few years), you can't check your file too early. Successful home purchases rely heavily on timing. Better to check your credit file ahead of time, rather than wait for the verdict from the creditor.  
  Also, look ahead towards other possible loans (a car, perhaps?) and credit card needs. Major life changes, like divorce, can also be triggers for checking your credit history.  
  Perhaps the best reason for checking your credit files periodically is the potential for identity theft, an increasingly common problem.  
  Lastly, if you do truly lead a dull credit existence, the only reason to check it may be to appease your vanity. This is one of the few times in life you can see yourself (at least your financial self) exactly as others see you. (Well, Larry the Lender, anyways.) Heck, if you have a stellar report, print it out and brag about it at cocktail parties.
 
     
 

I have been denied credit.

 
  If you have been denied credit, first, ignore the late-night TV spokesman offering to give you credit no matter what. (You'd think he'd be able to afford a better suit given his loan practices.) /td>  
  Ask the lender who turned you down whether a credit report was used in making the decision. If one was, you get a free copy of your report. There may be a simple error and a simple correction. .  
  For more on how to fix credit problems, including the ones that aren't there accidentally, see our article "How to Fix the Boo-Boos."
 
     
 

My credit file is free of errors and I still can't get credit.

 
  First of all, seriously consider the possibility that the creditor has made a prudent decision. We preach about the burdens of debt elsewhere on the site and you probably wouldn't be reading this if you didn't have a compelling reason to borrow more. So we won't go into it here. /td>  
  But ask yourself, honestly, how compelling your credit needs are and how much you are willing to pay to meet them… because you can usually get a loan or credit one way or another, if you really need it or want it badly enough. But such loans usually come with high fees and interest rates, a cruel irony given that many such borrowers are strapped with high debt payment loads already.  
  If you decide that you can wait, there are many groups that offer support in dealing with debt. Some areas have non-profit credit counseling services. They provide top-notch community support for folks struggling with the temptation of credit cards. Also, try to find a financial institution with whom you can develop a personal relationship. Small-town credit unions are often ideal candidates. Give them all your financial business and work hard to keep the slate clean.  
  Above all, steer way clear of any entity that advertises an ability to provide debt relief without pain. Almost without exception, it is not possible to back up such a claim. The sad truth is that people in dire financial straits to begin with are among the most common victims of scam artists.  
  The checkout clerk at the grocery store is giving me weird looks and all the tellers at the bank titter when I walk by.  
  You may be a victim of credit fraud. (Or you may just be wearing a really ugly hat.) If you fear that you have become a victim of identity theft, the first place to turn is the credit bureaus. Your credit report will reveal any suspect activity that you might not know about. You can even request that the reporting agencies refuse new inquiries or alert you to any that are done, though these services cost extra. There are measures you can take (for free) to protect your identity.  
     
 

Anatomy of a Credit Report

  
  Here's a guide to the pieces and parts of your credit report card and what they all mean. W/span>hat does your rap sheet say about you? It reveals how prompt you are in paying back loans, how much money you could borrow should you decide to go on a spending bender, and how many times you've applied for credit. What it does not reveal is your salary, business debts (unless you personally guaranteed a loan), and whether or not you're a generous tipper.  
  Your credit record also might not reflect all of your credit accounts -- such as travel, entertainment, gasoline card companies, and credit unions -- since some of these creditors do not supply information to the credit reporting agencies. Your deposit information, such as your saving's account kitty, are not part of your credit report. An individual credit report does not contain your FICO score, as calculated by Fair, Isaac.  
  Here's a rundown of what you'll see on your credit report from the big three consumer credit reporting agencies (Equifax, TransUnion, and Experian).  
  Identifying information  
  Obviously your name, address, phone number, and Social Security number appear on your credit report. But the report may also include a list of your current and previous employers, and even previous home addresses.  
  Your credit history  
  Your credit history is the centerpiece of your credit report. It includes a breakdown of your debt --  including:  
  Late payments (30 days and longer)  
  Outstanding debt (the amount owed, or size of payments for installment loans) /td>  
  The total amount of credit currently available to you (e.g., if you have a credit card with a credit limit of $8,000, even if you only use $1,000 or so of it a month)  
  These items will appear for all of your accounts (or institutions that have extended credit to you), including banks, credit card companies, mortgage lenders, auto-finance companies. These items will remain on your credit report for up to seven years.  
  Any public records  
  Public records include any filings of personal bankruptcy or court judgments against you. For example, if you do not pay your property taxes (tsk, tsk), your record will probably show that the local property tax board has filed a lien against you. These items remain on your credit report for seven years, except bankruptcies, which remain on your credit report for 10 years.  
  Inquiries into your credit  
  Whenever you or someone else (be it a bank, potential employer, etc.) checks your credit report, it shows up in your file as an "inquiry." There are two types of inquiries: hard and soft. Hard inquiries come mainly from lenders from whom you are seeking a loan. They look at your report to see what kind of credit risk you pose. If you're in good shape, and you get the loan, a hard inquiry will do no harm. If you apply for a bunch of credit at one time, however, prospective lenders may see that as a sign of desperation (or that you're going to try to make a run on the credit system).  
  If you are shopping rates for a mortgage, your report may reveal a cluster of hard inquiries. In the eyes of credit scorers (like FICO), this should not count against you, as long as you do your inquiries in a concentrated period of time (say, during a one-month period). When you are shopping around, ask the lender if they are going to make a hard inquiry to your credit report.  
  A soft inquiry will show up when you request a copy of your credit report, for instance. Soft inquiries do not stay on your credit report.
  
     
 

Getting the whole picture

  
  Unfortunately, the three major credit bureaus don't always have the same information. Some lenders report information to just one or two of the credit bureaus. So for a truly accurate take on your credit situation, you'll have to get copies of your reports from all three bureaus.  
  Your individual credit report also does not include your FICO score (or credit score), which is a serious shortcoming since it's what lenders rely most heavily on when deciding whether to give you a loan. You'll have to pay an extra fee to get your FICO score.  
  Your overall credit score is based on all of the items that appear on your credit report. So if you want to raise your overall credit GPA, start with your credit report(s) and work from there.  
     
 

How to Fix the Boo-Boos

  
  Don't be surprised if your credit report contain errors. Here's how to catch and fix the most common credit report mistakes./span>  
  Wouldn't you be surprised to discover you're dead, especially if the news came from your loan officer? A 30-year-old Detroit man certainly was. His alleged deceased status was the one snafu on his credit report keeping him from getting a new car loan.  
  Few credit dings are as devastating as that one. Still, credit reports may contain some inaccuracies. We're talking about flat-out wrong information -- not even those self-inflicted credit wounds that everyone tries to deny.  
  Here's how to spot credit blemishes and make them go away.  
  From scrapes to gashes  
  There are two kinds of credit report blunders -- information that's outright inaccurate, and boo-boos that reflect the errors of your ways. In either instance, the best way to approach the cleanup process is to start with the source, which, in most instances, is listed right there on your credit report.  
  In the very-much-alive Detroit man's case, it was an input error at the Social Security Administration that led to false claims of his demise. Other credit reporting errors can include accounts mistakenly attributed to you; application notices that you didn't fill out, and out-of-date home address or employment information. Errors can also include omissions, such as the presence of a delinquency that you've already remedied, or an old collection action that is still being reported as overdue.  
  With a little diligence on your part, such inaccuracies can be updated or removed from your record relatively quickly. (Just follow our six steps to disputing inaccuracies below.) Under the Fair Credit Reporting Act, credit bureaus are required to investigate your claim within 30 days. If it determines that an error has been made, it must correct the boo-boo and notify the other credit bureaus and you (with a free report).  
  Accurate negative information -- the stuff that's from your own doing, such as late payments and not calling your mother back promptly -- generally stays on your report for seven years, with a few exceptions, according to the Federal Consumer Information Center:  
  Information about criminal convictions may be reported without any time limitation.

 		  
  Bankruptcy information can follow you around for 10 years.

 
  Credit information reported in response to an application for a job with a salary of more than $75,000 has no time limit.
 		  
  When you apply for credit or life insurance in the amount of $150,000 or more, any credit information reported at that time has no time limit.
 		  
  Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
  
     
 

Be your own debt doctor

  
  With so much of your financial life riding on your credit record -- and so much that can go wrong with it -- it's not surprising that a number of people want to help you "fix" your credit. Trust us, they're not doing it out of the goodness of their own hearts. Consumers get scammed out of millions of dollars a year by so-called "credit repair clinics" or "debt Dr. Evils," as we call them here at the Fool./td>  
  If you're looking for the magic bullet -- the one sure-fire way to clean up your credit record -- you've come to the right place. Here are the two key ingredients to improving your creditworthiness (brace yourself): Time  
     
 

The responsible use of credit.

 
  That's it. Nothing else will make you squeaky clean in the eyes of the lending world. Not your Platinum card. Not doing more volunteer work. Not even calling your mother more often (unless she happens to head up a major credit bureau)./td>  
  When someone tells you they can wipe your credit record clean, they're lying. Or worse, they're telling the truth but using an illegal method to deliver on the promise. Methods can include creating fraudulent identities, producing false documents, and even making false claims to you about what they can do.  
  IIt may sound dull, but to heal your past credit abuses, simply pay your bills on time and demonstrate responsible credit management. The good news is that you have as much leverage with the credit bureaus as anyone out there. And there's no safer and more effective option than helping yourself get on the road to good credit.
  
     
 

Four steps to mending your errant ways

 
  1. Start with the source. Since the three major credit bureaus (Equifax, Experian, and TransUnion) all have slightly different information about you, you need to order your credit report from all three bureaus. Each individual report will cost you about $9 (that fee does not include your credit score). Some companies, like our sponsor Equifax, sell a side-by-side comparison of all three reports.  
  2. Determine what you owe and to whom. This is easy to do once you have your credit reports in front of you. Most of your creditors should be listed on your report. But remember, not all of them will be. Store credit cards, gas cards, and other small loans aren't always reported to the credit bureaus.  
  3. Catch up on payments. If there are any past due accounts, contact the creditor directly and let them know that you're ready to make amends. If you are unable to pay even the minimum amount on all of your accounts, you will need to look for ways to cut back in other areas of your spending. Lenders want to get re-paid -- no matter how little you owe.  
  4. Set a good example for your lenders. If lack of credit is one of the reasons your score is low, apply for a small loan from your bank, and make regular, on-time payments until the loan is paid off in full. You'll be exhibiting responsible credit behavior, which can go a long way in helping you build a better credit history. If you can't get a loan, consider applying for a secured credit card. With a secured credit card, you deposit some money with a lender and use that as collateral for your purchases. Again, make sure to pay the bill on time (and in full) every month.  
  Nothing in this credit re-building plan is rocket science. And it's certainly a plan you can implement yourself without the help of an expensive credit repair program. Again, diligent and disciplined saving and bill-paying will, in time, turn your credit history around.
  
     
 

Six steps to disputing a credit report boo-boo

  
  Taking on credit reporting inaccuracies is an entirely different matter. If you wish to dispute an item on your credit report that you feel is flat-out wrong, you can do so for free. When you contact the credit reporting company, they will investigate the dispute and, if applicable, issue you a revised credit report for free./td>  
  1. Start a record. Every step of the way, be sure to keep good records of all of your phone conversations and copies of each letter/e-mail/carrier-pigeon missive you send. Send all letters via certified mail (return receipt requested), and be sure to include copies of any documentation (such as an account statement that shows an account paid in full) that supports your claim. Also be sure to tell the credit bureau exactly what you want them to do -- whether it is to delete a false item completely or update an old entry.  
  2. Inform the credit-reporting agency (Equifax, Experian, or TransUnion), and tell them what information you believe is inaccurate. Check out the Federal Consumer Information Center sample dispute letter. The FCIC suggests that you enclose a copy of your report with the items in question circled.  
  Within 30 days, the credit-reporting agency will reinvestigate the items in question. They will forward all relevant data you provide about the dispute to the "information provider" (a lender, creditor, or other business that reported the inaccurate information). The creditor is then required by law to investigate your complaint and report its findings. Here are a few possible scenarios:  
  Disputed information that cannot be verified must be deleted from your file.

 
  If your report contains erroneous information, the credit-reporting agency must correct it.

 
  If an item is incomplete, the credit-reporting agency must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the credit-reporting agency must show that you're current.

 
  If your file shows an account that belongs only to another person, the credit-reporting agency must delete it.  
  If the disputed information turns out to be inaccurate, the creditor must notify all nationwide credit-reporting agencies, so they all can correct the information in your file.  
  3. Inform the business that sent the erroneous information of your dispute. Now that you've honed your letter-writing skills, let the creditor (or other information provider) know in writing that you are disputing an item it put on your report. You want to include communications with the credit bureau as part of the documentation trail, but the source of the problem is your best bet for successful resolution. Use any leverage you might have as an ongoing customer of the offending business.  
  4. Get the good stuff put into your file. If you've been told you were denied credit because of an "insufficient credit file" or "no credit file," take your pulse. If you're alive, and have accounts with creditors that don't appear in your credit file, you can ask the credit agencies to add this information to future reports. They are not required to do so, but if you ask nicely and they can verify the accounts, most will add them to your report for a fee.  
  5. Celebrate victory! If your dispute results in a change to your credit report, the credit bureau will give you the written results and a free copy of your report. While this marks the end of most disputes, be aware that the information can show up again. That will only occur if the creditor verifies the disputed item's accuracy and completeness. If that happens, you'll receive notice from the credit bureau and you can take it from there. Again.  
  6. Accept defeat -- but make sure you get in the last word. If you are unsuccessful in removing information from your credit file and reach an impasse, you always have the legal right to attach a letter of explanation to your credit file. Be sure to cover all three of the major credit bureaus as well as the offending business. The business is obligated to include your letter in any future input to the credit bureaus. Verify that they do.  
     
 

Avoiding Identity Theft

  
  What to do to protect your good name. And where to go to tattle on the bad guys if you fall victim.  
  It sounds like some dastardly Orwellian plot that involves making a plaster imprint of your face and fashioning silicone fingerprints and fake passports. But identity theft is an all-too-real modern-day phenomenon. According to the Federal Trade Commission, more than a half-million Americans will have their identities stolen this year.  
  The most common types of identity theft are:  
  - using or opening a credit card account fraudulently  
  - opening cell phone or utility accounts fraudulently  
  - passing bad checks or opening a new bank account  
  - getting loans in another person's name  
  - working in another person's name  
  Though that last one doesn't sound so bad to us (especially if they're contributing to Social Security and making their way through the items in our "to do" box), the fallout from ID theft are annoying, at best, and extremely costly and really, really annoying, at worst.
  
     
 

How to avoid ID theft

 
  Just how annoying is ID theft? Victims spend on average 175 hours and $800 to clear their names. In the interest of saving you a few C-Notes and several sleepless nights, here are some tips from the FTC on how to avoid identity theft: /td>  
  Actually look at your credit card and bank account statements, instead of just glancing over them quickly or passing them along to your spouse to pay off. This is usually the first place unauthorized activity will show up.  
  Call your credit card company or bank if an account statement is late. A missing bill may mean some meanie called the company using your name, and changed the billing address to prevent you from catching their shopping spree.  
  Don't give out personal information on the phone, through the mail, or online unless you initiate the contact or know the caller. Thieves will pose as bank representatives, Internet service providers, government agents, and ex-boyfriends to get you to reveal personal information.  
  Tear or shred any documents that contain personal information. These include credit card receipts, insurance forms, physician and bank statements, and even credit card offers.  
  Deposit outgoing mail directly into post office boxes, not in your own mailbox. A shocking number of thieves troll mailboxes for your personal information. If you're going on vacation, place a hold on your mail at the post office.  
  If you're one of the few people who actually knows where your Social Security card is located, don't carry it with you! Stash it away in a safe place, and only carry a minimum number of ID and credit cards with you.  
  Cancel any credit cards you don't need or use. Be sure to tell the lender to note the card as "cancelled at the cardholder's request."  
  Don't pre-print your Social Security or driver's license numbers on your checks. The "Kittens in Basket" check motif you chose is enough to dazzle the Safeway store clerk.  
  Give out your Social Security number only when absolutely necessary. Ask to use other identifiers when possible.  
  If you suspect that you may be a victim of fraud, or are simply a worrywart, order a copy of your credit reports once a year to verify their accuracy.  
  If you are really paranoid, then you can subscribe to a credit watch program that sends regular updates on any credit activity done in your good name. Services like the one offered by our sponsor Equifax alert you every time there's a change to your credit file and let you know if any bad guys are trying to get a line on some cash using your identity.
 
     
 

How to remedy ID theft

 
  If you find that your good name and stellar credit rating are being dragged through the mud, here's what to do./td>  
  1. Report the theft with each of the three major credit bureaus (they all have fraud centers).  Ask that a "fraud alert" be placed on your file. Also request that no new lines of credit be granted without first seeking your approval. You'll be asked to record the incident(s) in writing, and include copies of any documents (e.g., a police report, correspondence with your bank or other creditors) to be used as evidence. Here's contact information for each major credit bureau:  
  Equifax (http://www.equifax.com/), P.O. Box 740241, Atlanta, GA 30374-0241; report fraud by calling (800) 525-6285  
  Experian (formerly TRW, http://www.experian.com/), P.O. Box 1017, Allen, TX 75013; report fraud by calling (800) 301-7195  
  TransUnion (http://www.transunion.com/), Fraud Victim Assistance Division, P.O. Box 6790, Fullerton, CA 92634; report fraud by calling (800) 680-7289  
  2. Close accounts that have been fraudulently accessed or opened. To do so, contact the security departments of the appropriate creditors or financial institutions. If you open any new accounts, put passwords on them (and don't use the obvious ones like your mother's maiden name, your Social Security number, or the first six digits of your deceased great aunt-in-law's phone number).  
  3. File a report with local police, or the police where the identity theft took place. Be sure to get a copy of the report (or report number) in case the bank, credit card company, or others need proof of the crime.  
  4. Be a tattletale. The FTC provides an ID Theft Affidavit that can help you organize and accurately record your complaint. All three major credit bureaus and most of the large lenders accept this form as notice from you. You can also call the ID Theft Clearinghouse toll-free at (877) ID-THEFT (438-4338) to report the theft. For more information on how to deal with credit-related ID theft, check out the ID Theft website. If the crime involves your Social Security number, call (800) 269-0271 or visit the Social Security Administration's website.