Step 1: Check Your Credit Before You Apply

Why this step comes first

Almost every personal loan lender pulls a credit report and a score built from it. The rate you are offered, the amount and even a yes or no can turn on a single line of that file. If the line is wrong, you pay for the mistake in interest. If you learn about it only after a denial, you lose weeks.

Checking first gives you three things: a realistic sense of which lenders to approach, time to correct errors, and a chance to spot fraud, such as an account you never opened. It also tells you whether a freeze on your file will block the lender's pull. Plan this step one to six weeks before you want the money; the dispute clock is the slow part.

How to get your free credit reports

Federal law gives you a free report from each of the three nationwide bureaus every 12 months on request. On top of that, the bureaus have permanently extended a program that lets you check each report for free once a week. Both run through one place.

1. 1 Go to AnnualCreditReport.com by typing the address yourself, or call 1-877-322-8228. Lookalike sites and ads may try to sell you a subscription.
2. 2 Request all three reports. Lenders do not all use the same bureau, and the files are not identical.
3. 3 Verify your identity with your name, address, date of birth and Social Security number, and answer the questions the bureau asks about your past accounts.
4. 4 Save or print each report with the date it was pulled, so you can compare it later and attach pages to a dispute.

What to look for on each report

Go through the reports one at a time with a pen. Most problems fall into a few patterns, and each one can move a loan decision.

Also check the personal details: names, addresses and employers. A wrong address can be a sign of a mixed file, and it can cause trouble when a lender tries to confirm your identity. If you are rebuilding after a bankruptcy, see how lenders read a file after bankruptcy.

How to dispute an error and how long it takes

Send the dispute both to the bureau that shows the mistake and to the company that supplied the information, such as the card issuer or lender. Say exactly which item is wrong and why, and attach copies of your proof, not originals. Circle the error on a copy of the report.

• Timing: once a bureau receives your dispute, it generally has 30 days to investigate.
• Results: it must report back in writing. If the dispute changes your report, you also get a free updated copy.
• Lenders who already pulled your file: if you ask, the bureau must send the correction to anyone who received your report in the past six months.
• Other bureaus: if the company that reported the item finds it was wrong, it must tell all three bureaus.

Funditia, our sister site on credit, walks through the dispute letter itself in its guide to disputing credit report errors. If the corrected item matters to your rate, wait for the result before you apply.

Freezes and fraud alerts before you apply

A security freeze stops most new creditors from seeing your file, which also stops a lender you chose from checking it. Placing, lifting and removing a freeze is free at each of the three bureaus, and a freeze does not change your scores. You must contact each bureau separately.

Ask the lender which bureau it uses, then lift that freeze, or all three if it cannot say, for a window of a few days to cover the application and any recheck before funding. The difference between the pull a lender makes to show you a rate and the one it makes when you apply is covered in soft and hard credit checks.

What can go wrong at this step

• Paying for a free report. A site that asks for a card number to show your report is not the free program.
• Applying mid-dispute. A lender sees the file as it is that day; an error still under review can cost you a higher rate.
• Forgetting the freeze. A frozen file can stall an application or end it with a denial.
• Checking only one bureau. An error on one file stays invisible until a lender who uses that bureau pulls it.

When your file is accurate and open, move on to choosing where to borrow.

Questions people ask