Here's what you can do when mistakes sneak up on you

IN MARCH 1999, EDWARD AND SYLATHIA JOHNSON WERE ELATED AS THEY WENT TO PARKWAY Mortgage Co. in Savannah, Georgia, to apply for financing of a new home. They had just settled on a charming, picturesque home in the Planter's Common subdivision on the southside of historic Savannah. The couple was bewildered when the loan officer informed them that only a few lenders were willing to underwrite the loan, and only for 80%, because of Edward's low credit rating.

"I went to meet with the loan officer as a result of that conversation. He went over the report with me, attempting to explain what we would need to do in order to bring my husband's credit ratings up," recalled Sylathia.

Edward's credit report reflected that a JC Penney credit card account, opened in 1997, was over the limit and that no one had made a single payment toward it. Likewise, a Capital One VISA account had never received a payment, since its inception in 1998, but carried a balance. Oddly, Edward's daughter's name appeared in the reference section of his credit report.

"Edward and I have been married for six and a half years and I have handled all of our bills the entire time," says Sylathia. "I told the loan officer that those were not his accounts and he suggested that I call the Merchant Credit Bureau in Savannah (used by a mortgage company to make rulings). [The bureau], in turn, referred me to the three main credit bureaus [to investigate] the discrepancies."

Sylathia sent letters to Experian (formerly TRW), Equifax, and TransUnion. Initially each agency incorrectly told her that the accounts were that of her husband. She then called JC.Penney to further contest the report. After locating the account number in the computer, JC Penney informed her that Edward's name and Social Security number did not appear on the account. Furthermore, after sending a letter to Capital One, they determined that it was not Edward's account either. In fact, both companies found that the accounts in question were that of Edward's daughter, and agreed to correct the inadvertent errors immediately.

"I knew that although my daughter's name was on the account, she did not try to use my Social Security number. There had to be a mistake," said Edward. "My daughter and I have the same last name, the same first two initials in our first names, similar Social Security numbers, and she lives at my former address with her mother. They told me that it was a human error. But that human mistake could hang my butt."

Many consumers assume that whatever appears on their credit report is accurate and precise. After all, your credit report determines whether or not you can purchase a new home or car and how low the interest rate will be. It can also determine whether or not you get that high-profile job in a sensitive career field or the best insurance rate possible. It determines whether or not you get a VISA card with a $300 credit line and a 21% interest rate or an American Express Gold with an unlimited credit line.

As with the Johnsons, it is a very bad idea to assume your credit is as it should be. There could be an unintentional mistake on the part of the credit reporting agency (CRA) or an information provider such as a credit card company. Student loan organizations or mortgage lenders may have records that reflect you still owe them, while you are certain that your bills have been paid. Your former spouse could have agreed to pay all of your joint debts in your divorce decree, but several years later you learn that one of the debts appears on your credit report. Or, worse, yet, you could be a victim of identity fraud if another person uses your Social Security number. We've polled several experts who offer tips on how you can protect yourself from credit foul-ups. Here's what they suggest:

GET A COPY OF YOUR CREDIT REPORT

All of our experts agree that, without a doubt, every consumer should order a copy of his or her credit report at least once a year. "Any consumer who is thinking of making a large purchase such as a home, car, or condominium should first get his or her credit report from all three major credit bureaus. The reason is [that each agency] may have different records and you don't know which [agency] a company will use," says Shirley Rooker, president of Call for Action, an international nonprofit network of consumer hotlines in Bethesda, Maryland.

You can call, write, or go online to order credit reports from the three major CRAs (see sidebar). These companies gather and sell data--which reveals information about your credit worthiness--to creditors, insurers, employers, and other businesses.

There is no charge for a credit report if you have been denied credit, insurance, or employment as a result of what your credit report reveals, or if you're the victim of identity theft. However, you must request your credit report within 60 days. Also, you are entitled to one free report a year if you receive welfare benefits, your report is inaccurate because of fraud, or if you are unemployed and plan to work within 60 days. Some states require credit bureaus to offer consumers a complimentary report, even if they are not denied credit. Other states charge up to $9.20 per report. When ordering a report, provide your full name, current address, previous address, spouse's name (if applicable), Social Security number, and date of birth.

ENSURE YOUR REPORT IS ACCURATE

Once you have received and reviewed your credit report, it is important to remember that regardless of what any credit report "doctors" or "clinics" may advertise, they cannot change correct information on your credit report--even if it is negative. Accurate, negative information (i.e., late payments) cannot be removed for seven years. It takes 10 years for bankruptcies. However, you have a right to correct and have complete information on your credit report under the Fair Credit Reporting Act (FCRA).

"If the information is incorrect, the first thing that you should do is request--in writing--an investigation. You can start with a phone call. But you want a paper trail. It is often more effective to put pen to paper," says Kathy McNally, vice president for National Financial Literacy for the National Foundation for Credit Counseling (NFCC), America's oldest and largest nonprofit organization dedicated to budget and credit education and counseling, in Silver Spring, Maryland. "You have to persevere. If you have canceled checks or a letter showing you paid off the loan, send copies of it. Once the incorrect information is removed, you, as a consumer, can request that the correct information be mailed to all creditors who had requested information in the last two years."

According to Experian, these errors can be the result of several factors: (1) the consumer payment history is reported incorrectly by an information or loan provider; (2) the consumer causes a mistake by using his or her name inconsistently (i.e., Bob or Robert) to obtain credit. "Use your full name written on your birth certificate all of the time," advises Rod Griffin, manager of consumer communication for Experian, base in Orange, California; (3) the consumer may provide an inaccurate Social Security number; (4) the consumer omits the Sr. and Jr. with father/son names.

It's the first issue that disturbs the Johnsons. "It really made me angry when I found out what happened," says Edward. "I was turned down for cars and furniture in the last few years and didn't know why. The [credit card company] admitted that it made a mistake. But playing with someone's life is a horrible mistake. I work every day to take care of my family and pay my bills. And what my credit report says, although I am a grown man, is that I am not a responsible adult. That is unfair."

When the erroneous accounts were removed from Edward's credit report in October 1999, his credit rating score went up and the loan was approved for 95%. "Consumers usually aren't interested in credit reports until there is a problem," says Griffin. Experian produces and distributes detailed consumer education information that discusses credit reports, important facts about cosigning for loans, credit card fraud, credit issues surrounding divorce, and everything else that is essential to protecting one's credit rating. According to Griffin, this process of educating consumers helps them to better manage their credit history and determine their credit worthiness.

GET ADDITIONAL ASSISTANCE

Some consumers are not as fortunate as the Johnsons, who had the credit card companies inform the credit bureau immediately of the mistake, and, in turn, had the credit bureau acknowledge the error and handle it expeditiously. Some information providers may refuse to change credit information that consumers say is incorrect.