What to look for in your credit report before you apply

If a lender is going to read your credit file, the least you can do is read it first. Most owners haven’t. It takes about twenty minutes, and it’s the cheapest piece of preparation on the whole list.

Where to get your reports, and what they cost

Nothing. The Federal Trade Commission says each nationwide credit bureau must give you a free report once every 12 months if you ask, and that the bureaus also let you check each report once a week for free through AnnualCreditReport.com, the one site the FTC says is authorized to fill those orders.

Get all three, not one. Each bureau keeps its own file, and an error or a missing account can appear at one and not the others. Viewing your own report is a soft inquiry, so it doesn’t affect your scores. The detail about who sees what is in soft pull or hard pull.

What to look for

Reports are laid out a little differently at each bureau, but the same kinds of information turn up everywhere. Read them in this order.

1. Your identifying details. Name, addresses, employers. An address you never lived at, or a name that isn’t yours, is worth noting. It may be a harmless mix-up, and it’s worth ruling out anything more.
2. Every account, and whether it’s yours. Credit cards, loans, lines of credit. You’re looking for an account you don’t recognize, or one you closed that still shows as open.
3. Balances and limits. The numbers should match your own statements. A balance that’s higher than it really is, or a limit that’s missing, can make you look more stretched than you are.
4. Payment history. A late payment that you actually made on time is the classic error, and it’s the one that costs the most. Check the dates against your records.
5. Inquiries. This is the list of who has looked at your file. Hard inquiries, the kind lenders run after you apply, stay on a report for up to two years, according to myFICO, though FICO scores count them for only 12 months. Soft inquiries, like your own request for the report, are shown only to you.

Keep a notebook or a document open while you read. You’ll want your own list of what’s wrong, with dates, before you contact anyone.

What to do when something is wrong

You have more power here than it feels like. The FTC’s guidance is that both the credit bureau and the business that supplied the information to the bureau have to correct information that’s wrong or incomplete, and that they have to do it for free. You don’t need to pay anyone to ask.

The process is simple, even if it’s tedious.

1. Write it down. Explain in writing what you think is wrong, and include copies of documents that support your dispute. Never send originals.
2. Tell the bureau. The FTC page lists how to reach each one. Keep records of everything you send, and file with each bureau whose report shows the error.
3. Tell the business that reported it, too. The FTC says both the bureau and the business that supplied the information have to correct it, so write to the lender or card company directly as well.
4. Expect an answer within 30 days. However you filed your dispute, the credit bureau has 30 days to investigate it, according to the FTC. Check the report again afterward to confirm that the fix was made.

Why this belongs before the application

A lender will read the file you have today. If a mistake is dragging it down, you want it gone before the first application, not after a decline. And if you find nothing wrong, you’ve lost nothing: you now know what a lender will see, which is exactly what you need to judge how much funding you could qualify for and which lenders fit.

It’s also one of the five ordinary mistakes owners make before they apply. The full list takes a few minutes and has four more.

This is information, not financial or legal advice.