Proper Credit: Know Your History

Banks and mortgage firms check your credit report and you should, too. The Web can help.
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Many investors who diligently monitor their stocks and mutual funds never bother to check their credit.

But banks and mortgage companies who are thinking about lending you money won't care that you made 40% on

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this year. They want to know if you're paying your credit-card bills on time.

That's why you need to inspect your own credit report.

With the Internet, that chore is quicker and easier than you might think.

You should care what's on this borrowing and repayment history. Sure, you would already know if you pay your bills on time or have ever defaulted on a loan. You're really checking for major and minor inaccuracies that could hinder or prevent you from buying a home or car, renting an apartment or getting a job.

The three major credit-reporting agencies are

Equifax,

Experian and

Trans Union.

The

National Foundation for Credit Counseling

recommends that you get a copy of your credit report from each of these three agencies to ensure each report contains accurate information.

All three Web sites will let you order a credit report online. However, Equifax is the only one that lets you see this history on its Web site. With Experian and Trans Union, you'll have to wait to get your report in the mail.

If you live in Colorado, Massachusetts, Maryland, New Jersey or Vermont, these agencies are required to provide you with one free credit report each year upon request. If you live in Georgia, you get two free copies a year.

You are also entitled to a free report from an agency, regardless of where you live in the U.S, if you have been denied credit, employment or insurance in the last 60 days based on that service's credit report. In addition, you get one free report if you're unemployed and planning to look for a job within 60 days, on welfare or your report is inaccurate due to fraud.

If you're entitled to a free report, you cannot request one over the Internet. Instead, you will have to call an agency's toll-free number, which you can find on all three Web sites.

Otherwise, you'll have to cough up about $8 (sometimes less) to receive your report.

It's worth it.

On Equifax's Web site, you can easily order your report and see it in a matter of minutes for just $8. You'll get access to the information for 30 days, although the data will not be updated during that time.

First, you'll have to fill out a form with your personal information, including your name, address and Social Security number. Next, you'll be asked a series of questions to verify your identity.

Here's an example: "Your credit file indicates you may have a mortgage loan, opened in or around June 1999. Please choose the credit provider for this account from the following options." You'll have to pick one of five possible answers.

If you answer the questions correctly, you can pay with your credit-card number and have your password sent to you via e-mail.

Once you have access, you'll be able to see the standard personal-identification information, such as your current and previous addresses. Then you get to the good stuff -- your credit history.

Your credit-account information will list all credit cards, home-equity loans, mortgages and other loans plus their status. This record will include the name of the creditor, any balance, any amount that's past due and your history of paying your bills.

Here, you should inspect every item carefully to make sure the information is completely accurate.

If you closed a credit-card account, your credit report should indicate that you did just that, reading "closed by the consumer." The record should also contain the appropriate balances for your accounts.

As part of this report, you'll also find information from collection agencies and public records, which would show any delinquencies, bankruptcies or liens.

The report will also include a record of companies that have requested your credit file. Inquiries for promotional purposes (like credit-card solicitations) and periodic reviews by your creditors are not included on credit files that businesses receive.

The reports from Experian and Trans Union are similar, although you should also check those to ensure that they do not contain any factual errors.

You should be on the lookout for credit cards or loans that you've never had. These inaccuracies are major concerns and may be indications of identity theft and fraud.

You may also spot smaller errors, like an account that you closed that appears as if it's still open.

If you

do

find something wrong, you should take action immediately.

Under the

Fair Credit Reporting Act

, both credit-reporting agencies, like the big three mentioned above, and creditors or information providers are responsible for correcting inaccurate or incomplete information in your report.

You should notify both the reporting agency and the creditor in writing that you dispute an item. A reporting agency must investigate the information in question -- usually within 30 days -- and also must forward all pertinent data about the dispute to the creditor in question.

Under that law, these reporting agencies are also required to provide toll-free phone numbers manned by personnel who are available during normal business hours.

If you suspect that you're a victim of credit fraud, you should contact that agency's fraud division. (Each one has a

division to handle such crises.)

Let's hope simply checking your credit report doesn't come to that.

Send your questions and comments to

deardagen@thestreet.com, and please include your full name.

Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.