One in five of people have an error in their credit report. Even if it’s only a minor one, any error can have significant consequences. The likelihood of a nasty surprise increases if you’re not consulting your credit report regularly, but only a third of Americans actually check their scores each year. Too often, we wait for a major purchase that requires borrowing to pull up our credit report. That’s not the time to discover that the information is wrong or out of date. Here’s why you should monitor your report regularly, what errors on your credit report to look out for, and how to correct them.
Imagine losing out on your dream house because of a spelling mistake. That might sound dramatic, but if the personal information on your credit report isn’t accurate and up to date, the consequences can be far-reaching. It’s common too. According to Consumer Reports, roughly a third of consumers in the U.S. found at least one error in their credit report. Typical errors include alternative spellings of names, out-of-date addresses or mistaken identity for someone with a similar name. Because many lenders will use your credit report to verify your identity, an error can cause you to be locked out of your account, even when you’re giving the correct information. The solution? Don’t skip this section on your credit report and treat it as TBC until you’ve been through it line by line.
Go to the existing accounts section of your credit report, and you’ll find a breakdown of your past and present credit accounts, featuring the name of the lender, current balance, key dates, and whether the account is in good standing. Once again, errors slip through unnoticed if you’re not on top of your report. Innocent mistakes can happen, like someone with a similar name having a credit account that appears on your report. These can affect your credit utilization and thus your credit score. Alternatively, it could be something more sinister. If someone is trying to steal your identity to open up new credit cards, you’ll see strange entries from unfamiliar lenders. Should that happen, freeze your credit report immediately while you investigate further.
In theory, your report should give an accurate snapshot of your existing accounts, showing whether you are current with repayments or in arrears, and whether accounts are open or closed. In practice, not all lenders are up to speed with reporting, which gives rise to these common errors:
- Account is shown as open when it’s closed (or vice versa)
- Payments made on time are shown as late (beyond 30 days)
- Incorrect balances or credit limit are shown
- You are listed as the primary account holder when you’re only an authorized user
- Debts are still listed beyond seven years (or 10 for bankruptcies)
- Duplicate entries, with the same loan featuring twice or more
Errors in this section can be a serious nuisance. A debt that is wrongly reported as in collections, for example, can affect your credit score by up to 100 points. Since the pandemic in particular, when many borrowers were allowed to suspend their loan payments, around 1 in 6 consumers have experienced issues with accounts showing as delinquent when they are supposed to be in forbearance.
What You Can Do
Clearly, the first step is to obtain copies of your credit report. You’re entitled to one free report every 12 months from each of the big credit reporting bureaus, but be wary of leaving errors so much time to linger (or fraudsters so much leeway to act). Ideally, you should be checking your report regularly. If you do spot a discrepancy, contact your ‘information furnisher’ such as the bank, lender, or utility company to alert them to the error and confirm the details. Collect your evidence and submit a dispute. You should also write to each of the three big credit bureaus to request a correction, enclosing copies of your own statements and records. You may not get an immediate response. Most agencies take a month or so to investigate, so it’s always worth following up after 30 days to confirm progress. If you are not satisfied with the service you receive, you can also file a complaint with the Consumer Financial Protection Bureau.
Of course, there’s a more straightforward solution, and it starts with taking a proactive approach to your consumer credit report. With ScoreMaster®, you’re in control of your information from the start and one step ahead of anyone who tries to steal your identity. Start making a plan to keep errors at bay today.
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