Credit Audit Checklist

It's always a good idea to audit your credit reports before applying for credit. By looking over your credit reports you'll see the same information your potential creditors will be reviewing. Seeing the information first will give you a chance to correct errors or make other moves to improve your credit score before applying. Free copies of your credit reports are available from the website Annual Credit Report. The three nationwide credit bureaus set up the website to offer free reports as required by law. Your free report does not include your three-digit credit score, but will include directions for how to order your credit score separately.

Any audit of your credit should begin with a review of your credit score. An acceptable credit score is one of the most important requirements for being approved for credit. "Good" credit generally starts with a credit score of about 620. That could be enough to qualify you for a bank credit card, auto loan or a home mortgage, although your interest rates will probably be higher than borrowers with higher credit scores. It's also possible to be approved for credit with scores in the 500s. However, scores in the mid-700s and higher are considered ideal.

The three credit bureaus – TransUnion, Equifax and Experian – all issue credit reports. You should periodically check all three for errors that could be deflating your credit score. You're entitled to three free reports every 12 months from Annual Credit Reports – one from each of the credit bureaus. Check each report for inaccurate information and write letters to the credit bureaus asking them to remove the information. Find their addresses on the credit reports.

Review your credit reports for accounts reporting as past due. Along with your credit score, potential creditors will review how well you're currently paying your bills. Being behind on a couple of accounts could cause you to be turned down. Make note of the delinquent accounts and make payments to bring them current before applying for new credit.

Look for any accounts on your reports being listed as charged-off. Creditors will close your account and list it as being charged off if you stop making payments. A charge-off is an extremely negative entry on your credit reports because it suggests that you cannot be trusted to pay your bills. Before applying for new credit, contact your old creditor and offer to pay the full amount due on the charged-off account in exchange for it being removed from your credit report. The creditor isn't required to accept such an offer, but getting the entry off your report could improve your credit score.

Items listed on your reports as collections are also very bad. These are accounts that have been charged-off and sold to debt collection companies. Get the contact information from the collection company and offer to pay the debt in exchange for it being removed from your credit reports.