In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness–one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month on a topic that is related to the day’s step. Their dedication to financial literacy is truly inspiring! Today, Prime Time Money discusses debt.

How did you do? Did you pass the debt test? Understanding what makes up a poor debt situation is certainly an important part of this month-long journey towards financial literacy. For extra motivation though, today I thought I’d share some reasons why having less debt could lead to greater peace and happiness in your life.

I’m no stranger to unwanted debt. I’m currently working on paying off some debt I’ve had since college. I’m embarrassed to tell you how long ago that was. Paying off debt is a long and tough process, I realize. Therefore, I often stop to remind myself what it will be like when I achieve my goal of getting rid of my unwanted debt. Here are a few good reasons you might be happier if you were in less debt:

1. Less Hassle - Think about it. For every debt you get rid of, you rid yourself of a monthly statement to open and review, a bill payment to schedule and make, and an online account to log into and check. Less debt means less to do. I think we’d all rather spend our time doing things we enjoy versus sorting through another debt payment each month.

2. An Improved Credit Score - These days, your credit score affects things like insurance premiums and your ability to find a job. So having a high credit score can be very important to your overall financial success. By reducing your debt, you improve your balance to available credit ratio, one of the key factors that affect your credit score.

3. Less Worry When Things Turn Bad - It’s never a good time for an expensive medical issue or a job loss. But a hard time can turn really hard when you’ve got a lot of debt to worry about too. Getting rid of your unwanted debt will give you one less thing to worry about, if and when things go wrong.

4. It Just Feels Great Not to Owe Anyone - You’ve probably paid off a debt before. Remember that feeling? Imagine if you could experience that same feeling for all your unwanted debts. That huge burden lifted would feel great!

5. More Money for Other Goals - Lastly, imagine all the other things you could be doing with the money you’re using to pay debts right now. Here’s a few ideas: funding your retirement, saving for a down-payment on a new home, saving for a child’s college, giving more money away to charity, saving for a great family vacation. You get the point. Having less money going towards old debts means you can have more money going towards the things you want more, the things that matter the most.

Have a good reason to be less in debt? Leave it in the comments below. Thanks for letting me share my ideas and good luck with the rest of the 30 steps.

PT leads the daily discussions at Prime Time Money: A website dedicated to helping you save more money, get rid of debt, and live a frugal life. You can also connect with PT on Twitter (just follow him @ptmoney)

In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness–one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month on a topic that is related to the day’s step. Their dedication to financial literacy is truly inspiring! Today, Andy Jolls, creator of VideoCreditScore and former FICO® exec, discusses how to clean up your credit report.

Many of us have score impacting errors on our credit reports. In fact, this is the reason that a good number of us can have a 50 point swing in our 3 credit scores from the three credit reporting agencies. Since it’s a lot easier to correct bad data than to change your actual behavior, this is an important early step towards credit management.

Your most effective weapon in dealing with the credit bureaus is the Fair Credit Reporting Act (FCRA). You can read it if you’d like but here’s the skinny. Legally, the FCRA protects you by requiring credit bureaus to furnish correct and complete information to companies requesting credit histories for evaluation. If you find an error on your report, simply follow these steps:

1. Write to the credit reporting agency disputing the item and include any supporting documents. Keep a copy of all documents for your files. Here is a sample letter. Send these letters certified mail return receipt requested.
2. When the credit reporting agency receives your letter disputing the item, they must investigate the item in dispute (usually within 30 days) by presenting the information you submit to the creditor.
3. By law, the creditor must review your evidence and report its findings to the credit bureau.
4. The credit bureau must then give you a written report of its investigation and a copy of your report if the report results in a change.

You can also fill out an online dispute form provided by the credit bureaus. But, I prefer offline filing as it allows you to keep a paper trail. The Web sites for the three major credit bureaus are:

• Equifax www.equifax.com
• Experian www.experian.com
• TransUnion www.transunion.com

If an item on your report is found to be an error and is corrected, you can request that the credit bureau send corrected copies of your report to any creditor who received your report in the previous six months or any employer who received your report in the previous two years.

If you are not satisfied with the results of a formal dispute, you can also seek resolution with the source of the information. To do this, write to the creditor disputing the incorrect entry. After receiving your letter, the creditor may not report the information without including a notice of your dispute. In addition, once you have notified the source of the error in writing, it may not continue to report the information if it is an error.

Do not use a company to do this for you. Many companies charge a lot of money and all they do is get power of attorney and write letters on your behalf. Stay away from companies that call themselves “credit repair” companies. When it comes to credit repair, listen to the FTC, who says “do it yourself”.

If your request to remove an erroneous item on your credit report is denied after going through the dispute process, the Fair Credit Reporting Act gives you the ability add a statement in 100 words or less to your file giving your version of the dispute. (Note to Twitterers: this is 100 words, not 100 characters!)

Although they are not required to do so, the credit bureau will typically include your statement in future reports. For example, if you are divorced and have a defaulted loan on your credit report that was supposed to be paid by your spouse, briefly describe the situation along with any facts that support your claim that the problem was not your fault. Please stick to the facts; your credit report is not a good place to bash an ex.

If your application is a close call between approval and denial, this statement could make the difference—assuming someone will read it. It is important to understand that if you have a written statement on your report, a computer can’t read it. Also, a statement could slow things up. For example, if you apply for instant credit while at a store, your response won’t be instantaneous.

Following is an example of a written request to add a statement to a credit bureau file: