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Credit Q&A: Build Credit, Dispute Errors, and Prioritize Debt

Laura answers questions about how to build credit, manage credit utilization, correct credit errors, handle past due accounts, and prioritize debt the best way possible. Read or listen to the audio podcast for key tips to maintain good credit for life.

By
Laura Adams, MBA,
Episode #505

Credit Question #2

Phoebe M.R. says, “I'm in so much credit card debt and am trying to create a plan to pay it off. Should I focus on my card with the highest utilization ratio or the one with the highest balance first?"

Answer:

Thanks for your question, Phoebe. You’re moving in the right direction because having a plan is the first step toward taking control of your finances!

If your credit is good, I recommend that you focus on the highest-interest rate credit card first. For instance, if you have a card that charges 28% APY and one that charges 14% APY, tackle the 28% card balance first.

Getting rid of your most expensive card cuts the most interest, which you can use to pay off the balance even faster. Of course, continue making minimum payments on all your accounts, but funnel extra amounts into the most expensive card.

However, if your credit is in bad shape, it’s also costing you in ways that I previously mentioned. If you have average or poor credit, I recommend paying more on your card with the highest utilization ratio until it’s 25% or less.

See also: How to Build Credit With a Secured Credit Card (Podcast #437)

Credit Question #3

Kristy J. says, “I recently saw on my credit report that an apartment I rented a long time ago is trying to collect over $5,000 from me. I called the complex but they don't even have a record of me living there. When I left the apartment, my lease was up. What can I do to get this off my credit file?”

Answer:

Kristy, I know how frustrating it can be to see incorrect information on your credit report. Errors can be hurting your credit scores without you knowing it. That’s why it’s so important to check your reports at least once a year at free sites like Annualcreditreport.com and Credit Karma.

If you see an error on your credit file, dispute it right away with the credit bureau that issued the report.

If you see an error on your credit file, dispute it right away with the credit bureau that issued the report. You can submit a formal dispute online 24/7 with any of the three credit reporting agencies: Experian, Equifax, and TransUnion. Give a clear and concise explanation of why you believe the data in your file is incorrect.

However, if you suspect that an error is due to fraud—such as a new account on your record that you never opened—there are different procedures to expedite the process that may require speaking to a representative or mailing additional documentation.

Since you did live at the apartment, it sounds like the collection could be a genuine error and isn’t the result of fraud or identity theft. Once you make your dispute known, the credit bureau will open a claim and immediately forward it to the organization that originally provided the information. In general, the entity that submitted the data must verify it within 30 days.

In the meantime, I would also get the name and address of the collection agency and contact them by snail mail to request verification of the debt. I don’t recommend speaking with a collector on the phone because it’s easy to accidentally say something that gives them a leg up or resets the statute of limitations on a debt. So, keep all communication to certified mail so you have hard copies of everything, just in case you end up in litigation.

The bottom line is that a collector must prove that you owe the debt and that they’re authorized to collect it. If they don’t, it should be removed from your credit file.

See also: Facts You Should Know About Old Debt and Zombie Collections (Podcast #487)

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a trusted and frequent source for the national media. Her book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show. 

 

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