It might be time to help your parents—and grandparents—check their credit reports.
A new study, published in the CSA Journal, found that seniors are racking up greater amounts of debt and also face more problems on their credit reports than younger consumers. One in three people across all age groups reported finding some kind of mistake on their credit reports, and a greater percentage of seniors (36 percent) found errors. In one in four cases, the errors were significant enough to make an impact on credit scores.
The study also found that younger consumers were more likely to track their credit reports, while just one in four seniors did so. According to the Society of Certified Senior Advisors, which publishes CSA Journal, seniors should regularly check their credit reports, especially since they tend to have lower risk tolerance and lower earning power. Consumers can access their credit report for free at AnnualCreditReport.com.
Here are some tips to make sure your credit report is accurate:
• Get an annual checkup. Obtain a copy of your credit report—it's free once a year—at AnnualCreditReport.com. You have to pay to obtain your actual score, but getting the report alone will allow you to check for mistakes. And don’t fall victim to a site that requires payment for a credit report and then automatically enrolls you in a credit-monitoring service.
• Fix errors. Credit bureaus are required to correct errors by law. If you see a mistake, contact them, either through their website, over the phone, or by letter, to explain what's wrong. The Federal Trade Commission recommends including copies of any documents that support your position as well as the copy of the report itself, with the errors circled. The FTC offers a sample dispute letter on its website.
• Maintain a paper trail. Keep copies of everything you send to the bureaus, and request a return receipt at the post office so you know they received your mail.
• Beware of credit-improvement scams. Dozens of companies offer to help you improve your credit score for a fee, but the easiest (and cheapest) method involves a pretty basic technique: Pay all your bills on time, stay well under your credit limits, and keep accounts in good standing over many years. (See more details on specific strategies below.)
If you’re not happy with your current credit rating, here are some easy ways to give it a boost:
• Pay your bills slowly and steadily: The surest way to boost a credit score is to pay bills on time and keep accounts in good standing over many years. Avoiding credit altogether can do more harm than good, since lenders want to see that consumers have experience managing credit accounts.
• Don’t co-sign for a friend or relative: Even spouses can harm each other’s credit by co-signing for a credit card. Once your name is on account, you’re responsible for it, even if you break up. So limit your exposure to that risk by avoiding co-signing accounts whenever possible.
Despite rumors to the contrary, having a good job does nothing to boost a credit score. In fact, income has no effect whatsoever on a score. The only thing that matters is your credit history—whether you pay your bills on time.
If you do run into financial trouble and have to resort to filing for bankruptcy, your credit score can begin to rebound after one year of making on-time, regular payments. Then, after seven to 10 years, it can fully recover.
The bottom line: Use annualcreditreport.com once a year to check for any errors on your report and pay bills on time. Consider helping any older relatives to do the same.