How To Fix Credit Report Errors
An error on your credit report could be dragging down your credit score—and these errors are much more common than you might think!
We’ve written in the past about how important credit reports are—they are the tool that lenders, businesses, and employers use to determine how “risky” you are when it comes to paying back debts, like credit cards and personal loans, on time.
But did you know that there can be mistakes on your credit report? That’s right, and it may be more common than you think.
According to a recent report, the most common complaints received by the Consumer Financial Protection Bureau (CFPB), which has been running its Consumer Complaint Database since 2011, are related to the three major credit reporting agencies: Equifax, Experian, and TransUnion. Sixty-one percent of those complaints were related to credit reporting errors.
According to a study by the Federal Trade Commission, an estimated one in five consumers has an error on at least one of their three major credit reports.
Why is this an issue? Errors can impact your hard-earned credit score. You need a certain level of credit in order to get the best financing when it comes time to borrow money. Without good credit, your only options may be bad credit loans, no credit check loans, title loans, or payday loans (otherwise known as cash advances).
All of these leave you at risk of predatory lending, debt traps, and sinking your credit even further. Credit reporting errors can have an even bigger impact on those who are just starting to build their credit or those with poor credit who are working to improve it.
Luckily, there are ways to fix errors on your credit report. Here’s what to look for and what to do.
Step 1: Check Your Credit Report
You can choose to view all three at once or spread them out over the whole year. Just remember to note when you check your report, so you know when you can look again next year! As long as you look at each one only once a year, it does not impact your credit score.
It’s also important to realize that each credit reporting agency does things slightly differently. It’s not unusual to see slightly different information, and it’s possible to have an error on one report and have everything shipshape on the other two. That’s why it pays to view all three!
Step 2: Understand What a Credit Report Error Looks Like
What exactly is a credit report error anyway? According to Patricia Russell, a CFP at FinancialMarvel, a credit report error is “anything that’s inaccurate.” This can be something as simple as misspelling or name or listing an incorrect home address to something more serious, such as an inaccurate hard check on your report—something that can negatively impact your credit score.
According to the Federal Trade Commission study, one in four people have an error on one of their reports that could impact their credit score.
When looking at your credit report, make sure to read everything very carefully. Make sure your name and all parts of your address and identifying information are correct. Verify that all of the open and closed accounts are correct and that the balances and payment histories add up.
Review all of your hard credit checks—you’ll see on the report, for example, if you’ve recently applied for an auto loan, credit card, phone plan, etc.—and verify that you recognize each one.
If something looks unfamiliar, do a little research. Sometimes accounts, retail credit cards, for example, are listed by the name of a parent company, which may seem unfamiliar if your card is for a specific store. If something doesn’t add up, make a note of it.
According to Russell, the most common mistakes include “credit card balances that are wrong, the reporting of any account in an incorrect manner, and information for other people with the same name as you.” She notes that inaccurate information can also pop up “if someone’s social security number is close to yours.”
But errors can also indicate that someone is trying to steal your identity or commit fraud—another reason it’s important to check your report regularly. “Keep in mind that many people who have had their identity stolen have incorrect information on their credit report as well,” says Russell.
Step 3: Alert the Reporting Agency of the Error
Mike Pearson, credit expert and founder of Credit Takeoff, has a five-step process for contacting credit reporting agencies with errors:
- Dispute the item with the right credit bureau. An incorrect item may appear on only one credit report, but not the others. Dispute the negative item only with the credit bureau where the item appears. (You can find each bureau’s contact information on the CFPB website.)
- Send a letter to the credit bureau requesting that the item be deleted. Use a free letter template from the FTC website and be sure to send it via certified mail—giving you legal proof the bureau received your letter.
- Include lots of documentation. With your letter, attach a copy of your credit report with your disputed items highlighted, and include any supporting documentation, such as payment records or court documents.
- Send a letter directly to the lender. If the credit bureau won’t remove the item, send another letter to the lender explaining why the item is inaccurate or incomplete.
- Never admit fault! Do not admit fault or guilt in your letter! Stick to the FTC template and leave your personal “story” out of it—it could end up causing you more harm than good, since admitting to a late payment, for example, could give the credit bureau all the information it needs to not remove the item.
“Credit companies usually have up to complete their investigation in 30 days,” says Russell. “However, if they feel it is a frivolous dispute they won’t take the time to investigate.” If the credit reporting agency deems the dispute credible, they forward your documentation to the entity in question, which is called the “furnisher.”
According to the CFPB, if either the reporting agency or the furnisher decide that the claim is frivolous and that they won’t investigate, they have to notify you within five days.
If the dispute is investigated, one of two things will happen. If it’s deemed an error, the furnisher will correct the information and notify all the credit reporting agencies. If it’s deemed correct information, it will not change on your report, but you can ask that a statement explaining the decision is included in your credit file. This will be sent to anyone who checks your report in the future.
According to the FTC study, four in five people who filed disputes saw some change to their credit report.
A Note on Identity Theft
Suspicions of identity theft are treated a little bit differently than regular credit report mistakes. If you think you are the victim of identity theft, visit IdentityTheft.gov to report it and start the recovery process. To learn more about keeping your identity safe, check out these other posts and articles from OppLoans:
- 5 Steps You Can Take to Prevent Identity Theft
- How to Protect Your Personal Info While Traveling
- Watch Out for Change-of-Address Identity Theft Scams!
- 8 Tips to Spot an Online Imposter
|Mike Pearson is the founder of Credit Takeoff, a research-driven personal finance site for people looking to improve their credit. A proud member of the 800 Credit Club, Mike writes about practical steps that everyday consumers can take to increase their credit scores. His advice on credit repair and credit scores has appeared in QuickBooks, Go Banking Rates, and MortgageLoan.com.|
|Patricia Russell is a Certified Financial Planner (CFP) and the founder of the personal finance blog, FinanceMarvel, which provides free financial advice on managing credit, debit and savings. Patricia has more than 10 years experience in helping families and individuals take control of their personal finances and achieve financial independence.|
The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through the OppLoans blog.