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credit & debt

Don't Sweat Small Credit-Report Errors

If you're about to apply for financing and your score already is high, wait to fix any minor mistakes on your report.

I have a good credit score (Experian says that I am in the 95th percentile), but all three of my credit reports show at least one error. I want to correct the errors, but I don't want to risk doing any damage to my credit rating because I am starting a new business and will need some financing.

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The errors are: Equifax has an incorrect term duration and balloon amount on my piggyback mortgage. Experian and Equifax have an old employer listed as my current employer. TransUnion also has an inaccurate loan term on the second mortage and shows a credit-card account that has not had any activity on it since 1998. I know that it has been closed, but it's not listed as closed. My student loans have been consolidated, but some of the prior accounts still show up as having balances. Because I need the financing ASAP, should I wait until after I obtain financing to correct these issues?

It's better to wait to fix these small errors, says Emily Davidson of Credit.com.

"Being in the 95th percentile usually designates a score of over 800," she says. "If this is true, he would be crazy to try to improve it further before a big loan application."

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Davidson says any changes you make likely would damage your score, not improve it. Besides, an increase in your already high score (from 800 to 850, say) wouldn't make a discernible difference in your loan rates.

Most of those errors, such as the incorrect mortgage terms and employer information, aren't affecting your score anyway. "There's not much reason to change this, but he could do so without worrying about score damage," Davidson says.

And the old credit card could be helping your credit score. "The old credit-card account is probably contributing a healthy amount of positive points toward his credit scores, especially if it is the oldest on his record," she says. "Having the account marked as closed could mean a big score drop."

One element of your credit score is based on the age of your oldest card. The score looks at the average age of your credit cards. Closing out any of your old cards can shorten the average age, which is why it's a good idea to keep old cards open even if you don't use them anymore (as long as you don't have to pay an annual fee). See Don't Close Credit-Card Accounts.

Davidson says don't worry about the student-loan records right now, either.

You can deal with all of these issues after you get your financing. And keep up the good credit habits that have given you such a high score. "Obviously, what he's doing with his credit is working," says Davidson.

For more information about steps to take to improve your credit score -- or what factors into your score -- see Demystifying Your Credit Score.

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