In the world of personal finance, few things are as important as your credit report, which highlights your financial background and discloses personal payment history to prove loan and credit eligibility. Documentation of such importance should be infallible; unfortunately, mistakes do happen.
“Credit report errors can occur in many ways,” said Christopher Morgan of Credit help information, which listed common error types:
Personal Information Errors: These may include misspelling your name and incorrect contact information.
Wrong accounts: A retail credit card or loan can be opened in your name without your knowledge.
Account report errors: Includes incorrect payment and balance information.
“Additional common mistakes include loan or credit card payments being applied to the wrong account, credit listing using different names such as James Smith vs. James B. Smith [and] close accounts where it looks like the creditor closed the account and not you,” said Bruce Garner, founder of card keeper.
How to know if there was an error
The most important step you can take is to regularly request a copy of your credit report.
“You have the right under federal law to request a copy of your credit report every 12 months,” said Tony Martins, founder of Profitable business. “However, if you’ve used up your free copy for the year, you can still access it, but this time you’ll have to pay for it.”
To spot these errors before they do serious damage, you should review your credit reports at least once a year, but it’s best to do it twice a year. When reviewing, look for “negative reporting issues or significant changes in your FICO score,” Garner said. If you’re not proactive with your credit report requests, you’ll likely discover an error and get turned down by lenders.
“Another clue that you have errors on your credit reports is denial of credit when you mistakenly think you have good credit,” said Laura Adams, personal finance expert at Clearsurance. “Declination can result from errors such as late payments, incorrect account balances or legal data (such as a judgment or bankruptcy). Any of these errors could cause your credit scores to plummet without you knowing it.
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Why do these errors occur?
The next question is, “How do these potentially life-changing errors occur in the first place?” It can be as simple as a typo or outdated documents. Depressing, it’s completely out of your control.
“Credit reporting agencies collect all credit information on consumers individually and with these records; they offer a credit score for each consumer,” Martins said. “Here’s how errors happen in your credit report: These credit reporting agencies get all the information they use to generate your credit score from your creditors. For example, if you have a credit card, your credit card provider will provide information about your repayment commitments to the credit reporting agency. The same goes for bank loans and any other credit obligations you may have. Your creditors could make an error in the information provided to the reporting agency and such errors would certainly end up in your credit file.
Plus, sometimes the credit bureaus just haven’t updated your data, which means they’re using old information, such as your student loan amount, before your most recent payments.
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How to fix the error
After becoming aware of an error (which, again, you should investigate as soon as possible), the next step is to fix it. It wasn’t your mistake, but alas, it’s up to you to fix it. Here’s what experts recommend for cleaning up the gaffe.
File an online dispute with a credit bureau
“Say the incorrect information and the agency will review it,” Morgan said. “Also provide copies of supporting documents.” The quickest way to do this will (usually) be to initiate an online dispute.
“When filing a dispute, be sure to include all relevant information such as your name, address, information about the item you are disputing and account number, the reason you are disputing the entry, supporting documents and an instruction to investigate the item,” Martins said. “The company would review your disputes and contact you as soon as they do. You can also hire a professional to help you if you feel you can’t handle it yourself.
Contact your lender and write them a letter explaining the situation
“Attach copies of your documents for evidence and request a corresponding letter to stay on top of the situation,” Morgan said. “It may take around 30-90 days to resolve.”
“The credit bureaus are obligated to respond to your disputes, but sometimes it takes forever,” said Paul Sundin, CPA and tax strategist. “Don’t be afraid to pursue your dispute. Even if they fixed your problem, continue to keep an eye on the problem because it may still occur on your next credit report.