If you want to learn how to build credit and raise your credit score, you simply must pull it.
I’m talking about your credit report.
I tell my clients that they must review their credit report at least once every six months, and, depending on how low their credit score is, perhaps even quarterly.
In Step Five of my book, 7 Steps to a 720 Credit Score, I explain that almost 80 percent of people have errors on their credit report, and 25 percent of these are severe enough to cause a person to lose a loan or a job opportunity.
So what do you do if you spot an error?
First and foremost, if you think you are a victim of identity theft, call the three credit bureaus right away to put a freeze on your credit account. This way, no one else can open credit in your name.
If the mistake doesn’t seem to indicate that you are a victim of identity theft, you can start by filing an online dispute at each of the three credit bureaus. Following are links:
As well, contact the credit card company or the bank in question. If they are reporting incorrect information, you can get the ball rolling by asking them to investigate the mistake.
One of the most common (and dangerous) mistakes you will find is an inaccurate credit limit.
So why does an inaccurate credit limit hurt your credit score?
The credit-scoring agencies give higher credit scores to people with lower utilization rates (your credit card balance as a percentage of your limit.) If your limit is, for instance, $2,000, and your balance is $600, you have a utilization rate of 30 percent.
This is a good utilization rate, and it should help your credit score.
But if your credit card company is reporting your limit as $1,000 instead of $2,000, your utilization rate will appear to be 60 percent (a $600 balance on a $1,000 limit). This is a bad utilization rate, and it will cause your score to drop.
So if you want to build your credit score, start by filing a dispute with all three credit bureaus. At the same time, place a call or send a letter to your credit card company demanding that they report your correct limit.
Then, be sure to pull your credit report again to make sure that the mistake has been corrected.
Oh, and one more credit repair tip: Your credit score will never be damaged if you pull your own credit report. Though inquiries into your credit score by lenders will cause a dent in your score, pulling your own credit report is considered responsible behavior. So do it freely!
Have any questions? Need a credit repair tip that will help you build a 720 credit score? Be sure to leave a comment below.