To check for mistakes, nearly a thousand people in the United States met with an FTC representative in 2012. The outcomes weren’t promising.
About one-quarter of these individuals discovered inaccurate information that might have an effect on their credit score. Because of it, some of them appeared less attractive to lenders, which made it harder for them to secure financial aid or the most advantageous interest rate available when seeking financing.
Even so, the study did find some encouraging results. Four out of five individuals who contested mistakes on their credit reports were successful in having the information corrected. Ten percent of customers experienced a shift in their credit score as a consequence, and five percent saw an increase of at least 25 points, qualifying them for lower interest rates on future loans.
This research emphasizes the need of monitoring one’s credit report and challenging any discrepancies one may uncover. The most common types of credit report problems, how they affect you, and what you can do to correct them are all covered here.
Credit Report Error Types
Some credit reports may have substantial inaccuracies, while others may contain small ones. Common credit reporting inaccuracies include, per the Consumer Financial Protection Bureau (CFPB):
- Incomplete or incorrect name, address, or account numbers
- Accounts that have been closed are still shown as open.
- Credit accounts that do not belong to you (such as debts belonging to an ex-spouse)
- A single account that appears many times
- An open account with the incorrect amount or credit limit
- Payment information that is incorrect (such as an on-time payment listed as late)
- Accounts indicated as belonging to user
What Causes Credit Reporting Errors?
There are several possible entry points for inaccurate data on credit reports. Some potential mistake causes are:
- Problems with Your Name. The fact that you tried to open several accounts under slightly different names, such as “Michael Smith” and “Mike Smith,” or under your birth name and your married name, might cause confusion and delay processing. Due to such trivial discrepancies, your credit report can mistakenly contain data for someone else with a similar name. That’s why it’s smart to always apply for credit with the same full name and middle initial.
- Due to a lack of information from the creditors, we cannot proceed. The majority of financial institutions and retail establishments that provide credit cards will submit account information to the major credit reporting agencies. It is not a legal requirement, however, and some creditors may opt not to comply. Lenders may reject your loan application if it seems that you have a “insufficient” credit file due to unreported credit accounts. To fix this problem, either contact your creditors and request that they begin sending your payment and account information to the credit reporting agencies, or switch to a service that does so automatically.
- Incorrect paperwork. Of course there will be blunders. If you apply for credit by hand and have it transcribed, or if you apply online and make an error in your personal information, you may experience delays in processing. It might also be that a bank employee misapplies a payment you sent for a loan or credit card. On the other hand, it’s possible that your credit score might be inflated if a lender reported duplicate information about one of your accounts.
- Fraud involving the use of a victim’s personal information. If there are errors on your credit record, chances are good that they weren’t intentional. Nonetheless, mistakes might appear if your personal information has been stolen and used by a criminal to get a loan and leave you footing the price. Indicators of identity theft include the appearance of accounts you don’t recall creating or locations you’ve never lived at. Before the thieves do any more damage, it is crucial to find the truth behind these inaccuracies and correct the record.
Why Are Errors Harmful?
Inaccuracies in a credit report might have negative consequences for you in two ways. To begin, they can reduce your credit score, which has far-reaching consequences. There is a negative correlation between a low credit score and:
- Obtaining loan approval
- Obtaining a low interest rate or acceptable loan terms
- Renting an apartment (landlords frequently check your credit to determine whether you will pay your rent on time)
- Obtaining Employment (employers sometimes use credit checks to weed out unreliable applicants)
- Obtaining a security clearance if you want to work for the government.
- Finding a low-cost auto insurance coverage (drivers with poor credit are more likely to be involved in accidents)
Even more significantly, identity theft might be indicated by mistakes on your credit record. If your identity is stolen, it might affect your credit, cause you to pay for things you didn’t buy, hurt your chances of being hired, and in the worst case scenario, have you jailed for a crime you didn’t commit.
Restoring your identity after theft may be a difficult, time-consuming, and expensive ordeal. The higher the inconvenience and cost, the longer the theft has been going on. That’s why it’s important to stop identity theft before it does too much damage by catching it early.
Error Detection and Correction
It’s in your best interest to spot any mistakes on your credit report and get them corrected as soon as possible. The good news is that there is no financial cost associated with fixing a mistake; however, doing so does require some time and effort. See below for instructions on how to proceed.
Step 1: Examine Your Credit Report
Checking your credit report is the first step since you can’t correct any mistakes if you aren’t aware that they exist. Visit AnnualCreditReport.com once each year to acquire your free credit report from each of the three main bureaus.
You have the option of obtaining all three reports at once or spreading them out over the course of the year, reviewing one report every four months. Staggering your credit reports is a great method to see any problems early on before they escalate, as any issue that appears on one report is likely to be on the other two.
Customers can view their credit records more often from each of the three major credit bureaus during the current COVID-19 epidemic. Each bureau’s report can be obtained for free as frequently as once per week through April 2021 by visiting AnnualCreditReport.com.
This is in accordance with the FTC’s disclosure guidelines. Once you join up for an Experian account, you’ll continue to receive a free credit report and credit score every 30 days, regardless of how long ago you first signed up.
Even if nothing appears to be wrong with your credit, you have the right to a free copy of your credit report at any time. If you have been denied credit, employment, or insurance because of your credit report, you are entitled to a free copy. If you think you are a victim of identity theft and put a fraud warning on your credit report, you will also receive a free copy.
Last but not least, if you are currently jobless but plan to begin looking for work within the next 60 days, you are entitled to a free copy of your report once per year.
Step 2: Collect Evidence
You’ll need proof that the information on your credit report is inaccurate if you notice mistakes and wish to dispute them. Some examples include loan paperwork, credit card statements, bank statements, and even a birth certificate if the error is significant enough.
If your divorce order is needed to correct the name of your ex-spouse on a financial account, for instance. Credit bureau investigators will be able to verify the accuracy of your claim much more quickly if you provide copies of the supporting documents you cite.
If you suspect that identity theft is to blame for the mistake you uncovered, you should offer evidence of this as well. Report the theft to IdentityTheft.gov and print off a copy to give to the credit reporting agency. Get a copy of the identity theft police report, if you submitted one.
Step 3: Appeal the Error
Fixing an inaccuracy on your credit report is free and may be done as frequently as you see fit. The three major credit reporting agencies (Equifax, Experian, and TransUnion) all have dedicated websites where you may submit such a request.
When an error is made, you can contact the bureau using the website’s listed phone number or mailing address to file a complaint. If you opt to dispute a credit report via mail, you should send it certified and get a return receipt to show that the credit reporting agency really got it.
Step 4: Make contact with the lender.
The FTC suggests that after contacting the credit bureau, you also contact the lender that first reported the erroneous information. You should write to this organization, sometimes known as the “furnishing firm” or the “furnisher,” and include the same supporting documentation that you sent to the credit bureau.
You can find model letters to communicate with a lender on the FTC and CFPB websites. Request a “cc” on all future correspondence between the furnisher and the credit reporting agency. Doing so will let you know if the lender is cooperating with your request to rectify the problem or if it is still reflecting the incorrect data.
Experts recommend getting in touch with the supply business before submitting a dispute to the credit reporting agency. Going straight to the lender eliminates a step that the credit bureau is unable to do because all it can do is notify the lender of the problem.
Credit bureau mistakes are more likely to be the result of user error, but identity-related mistakes, such as misspelled names or addresses, are more likely to have been made by the credit bureau. It would be best to start at the relevant government agency in this scenario. Since the department may correct its own error without involving anybody else, you should expect a quicker result.
If you haven’t already, check the other two copies of your credit report to make sure the mistake isn’t replicated elsewhere.
Step 5: Wait for a Reaction
The credit reporting agency has 30 days to look into your complaint. If you request it, it must send you a written report of its findings within five days. If you don’t already know the name, address, and phone number of the furnishing firm, you’ll need to know it from this note. If there is a modification to your credit report as a consequence of the dispute, the bureau must also offer you a free copy.
You have 30 days to file a formal complaint with the furnishing business, and they have 30 days to investigate your claim. Within that time frame, the lender must notify the updated information to the bureau if it agrees with you that there was a mistake. It will also notify the other credit reporting agencies so that they may update their files accordingly.
If it determines that the data is correct, it will not change anything but is required to alert the bureau that you have a problem.
Step 6: Examine the Results
It’s not always possible to correct an inaccuracy on your credit record. There are instances where the provider persists in defending its initial data as accurate. In this case, you can dispute the item and have the credit bureau add a notation on your file to that effect.
You can also request that the credit bureau send a copy of this disclosure to anybody who has recently accessed your credit report for an additional cost. A delay in the error’s removal from your credit record is possible, even if the supplying business agrees to make the correction.
When the lender updates the credit bureau with new information and when the credit agency updates its own files are both factors. If you check your credit report after four months and find that the error has not been corrected, you should follow up with both the credit bureau and the furnishing business to make sure they have the right information.
Once errors have been repaired in your credit report, you may request that the credit reporting agency notify those who have requested your credit report within the preceding six months. While job hunting, you can request that the credit bureau update your file and make it available to anybody who has examined it within the last two years.
You may register an online complaint with the CFPB if you’re unhappy with the outcome of your dispute, whether because it took too long, the investigators were unpleasant, or you weren’t able to have a valid problem remedied. Provide as much detail as you can about the issue at hand, being sure to specify whether the credit bureau or the furniture store was at fault. The CFPB will relay your concerns to the business and keep you updated on its response.
Resolving a dispute with your credit report may be a time-consuming and stressful procedure, especially if you have to file your claim more than once with updated information.
That’s why it’s even more important to get right in and start working on it. A lower credit score is less of a threat if you catch an issue quickly and have it corrected.
On the other hand, you shouldn’t contest every single inaccurate item on your credit report and hope for the best. Your lawsuit will be deemed frivolous if the derogatory information is true. You, the credit bureau, and everyone else involved will be wasting your time.
Inaccurate negative information on your credit report may only be removed by the passage of time. Two years after a hard inquiry disappears on your credit record, seven years after late payments and unpaid debts, and ten years after a Chapter 7 bankruptcy. Your credit score will rise over time if you make responsible use of credit.