The Big Secret to Navigating the Confusing World of Credit

Understanding your credit reports and credit scores is important — but isn’t always easy. And if you have to deal with credit reporting agencies (CRAs), creditors, debt collectors, and the like, it’s sometimes infuriating to try to navigate this complex system: They use different terminology and they sometimes have different priorities and a different timeline than you.

So how do you make your way through it all? One simple secret — facts. Facts are so powerful and they will transform how these different organizations will treat you when you communicate with them.

While it might sound funny for me to say that facts are the big secret to navigating the credit industry, you’d be surprised how often people’s emotions or assumptions take over, such as when they are trying to solve an error on a credit report or when they are dealing with debt collectors. It’s perfectly understandable: There are a lot of incorrect assumptions about the credit industry, and dealing with money (and especially outstanding debt) is very emotional. But you will get better results when you keep a level head and bring facts to the table.

How to Arm Yourself With the Facts

Here are the five things you can do to ensure that you are fully prepared with all the facts you need to help understand your credit.

1. Keep all statements.

When your bank, credit cards and utility companies send you a statement or bill in the mail, pay it on time and keep the statement. By paying the bill on time, you’re keeping a positive payment history and keeping the record can help you if a mistake is made.

2. Keep all receipts.

When you get each credit card and bank statement, compare it to your receipts and make sure that you know everything that went onto your credit card that month.

(A client of mine recently discovered a $500 fraudulent charge on his credit card this way and was able to present enough facts to the credit card company that they reversed the charge).

3. Make sure you check your credit reports and credit scores regularly.

You can pull your credit reports from Experian, Equifax and TransUnion once a year for free. Go through them and check for errors. Monitoring your credit scores regularly can tip you off to problems with your credit reports. You can check your credit score for free once a month using the Credit Report Card.

4. Keep good records.

If you ever speak to someone in a way that impacts your credit – either when borrowing money or paying it back, or with all debt collectors – keep a record of your conversations. Write down who you spoke to, the date and time, and what you talked about.

Likewise, if you mail, fax or email information (and especially if you send a check in the mail), take note of when you sent it and where you sent it.

5. In the case of a dispute with a creditor or debt collector, request your payment history.

This will give you a record of when amounts were due and when payments were made. I’ve seen some clients avoid debt collection notices on their credit report because their payment history showed the facts and revealed an error by the creditor.

Now you might be reading this and thinking: This seems like a lot of work. But it only SEEMS that way.

It takes some discipline, but once you get into the habit, it doesn’t actually take very long. And the benefit is: You’ll more likely have squeaky-clean credit and you’ll always have the facts at your fingertips whenever you deal with CRAs, creditors and debt collectors.

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