Checking your credit report for errors falls into the same category of regularly flossing your teeth. It's something that everyone knows that they should do, but don't always get to.
More than 60 percent of people did not review their credit report and another 55 percent did not know their credit score, according to the National Federation for Credit Counseling 2012 Financial Literacy Survey. This statistic is especially concerning because a recent report released by the Federal Trade Commission found that errors affecting the overall credit score were on 21 percent of credit reports examined.
Check Your Credit Report Regularly
If you do not check your credit report regularly, you are increasing your risk of being turned down for loans, paying higher interest rates and suffering losses due to identity theft.
George DeMare, principal at Midwest Mortgage Capital, said loans are given out using a risk-based model that rewards consumers with better credit scores with lower interest rates because they represent a lower lending risk for the financial institution. This means that you may unknowingly have an error that reduces your credit score and pushes you to a higher interest rate. If you are purchasing a $300,000 home with a 680 credit score, you are going to pay over $70,000 to $80,000 more (due to the higher interest rate) than you would have paid with a 780 credit score, DeMare said.
Denis G. Kelly, president of IDCuffs and author of The Official Identity Theft Prevention Handbook, said that reviewing your report can also alert you if your identity has been stolen. While some damage has already been done at that point, by catching the thief early you can prevent further damage by putting a fraud alert on your credit report.
How to Check Your Credit Report
Since you can get a free credit report from each of the three credit bureaus every 12 months, Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, recommends requesting a copy from a different bureau every four months. Even though all creditors do not report to all three bureaus, by staggering your reports, you can catch most of the errors that reduce your score, Cunningham said.
DeMare said that he often gets customers asking about the difference between FreeCreditReport.com and AnnualCreditReport.com. AnnualCreditReport.com is the only site that provides truly free credit reports, DeMare said. You should only request your credit report through AnnualCreditReport.com.
Once you receive your report, go through each item carefully and determine if you opened the account, if any late payments are accurate, all credit limits are accurate and that any information has not outlived the seven-year limit. Cunningham cautions consumers from expecting they can have negative information removed if it is correct. Only inaccurate or fraudulent information is eligible to be removed. If you share the same first name as someone else in your family, such as a father or son, you should also verify that none of their information or credit history shows up on your report.
Additionally, Kelly cautions people to not overlook small errors such as misspelled names or an incorrect birthday because they can actually be a sign that you could be a victim of synthetic identity theft. A common way to steal someone's identity is to open accounts and loans using a slightly different name or birthday which initially opens a new credit file until it is eventually merged with the person's main file, Kelly said.
What to do if You Find an Error
DeMare recommends consumers first address any errors that they find with the merchant or financial institution that provided the information. Most people initially start their dispute with the credit bureaus, but since the bureaus will contact the merchant you should make sure that the debt is cleared up with the creditor before filing a claim, DeMare said. After you address the issue with the creditor, get the resolution in writing and then contact the credit agencies. According to the Fair and Accurate Credit Trade Act, the bureaus then have 30 to 45 days to investigate and respond to the claim.
Cunningham said people are very motivated to improve their credit scores and will go to great lengths to chase a few points. But it is important to realize that your credit score is based on the contents of your credit report, Cunningham said. The place to start improving your credit score is by reviewing your credit report for errors.
The Truth About Free Credit Reports
We’ve all seen the commercials about free credit reports involving pirates and Renaissance fairs, but what’s really behind those gimmicks?
If you have ever been tempted to visit one of these websites that promise free credit reports, don’t. The vast majority of these sites will try to sell you something you don’t want before passing along copies of your free credit reports. You may end up on their email list and never be able to get off.
Your Credit Report Is Valuable
It’s natural to want to get a look at your free credit report. After all, this report serves as the basis for your three-digit credit score. Lenders use your score to determine if they’ll lend you money and at what interest rate. If your credit report contains errors – which you’ll find by studying your free credit reports – it can result in a score that’s lower than what you deserve. If you correct these errors, you can improve your credit score.
The problem is, most of the free credit report companies out there, including the most famous, FreeCreditReport.com, only provide customers free reports with a catch. Always remember: nothing is ever free, especially online. Consider FreeCreditReport.com: Consumers must agree to sign up for a seven-day free trial of the company’s credit-monitoring service. If consumers then forget to cancel the service within nine days after accepting the free-trial offer, their credit card will be charged $14.95. This charge will recur until consumers cancel it.
Free Credit Report Options Without The Hook
A better option is to go to the only website that offers free credit reports without any strings attached. That’d be AnnualCreditReport.com. This site was created as the result of the Fair and Accurate Credit Transactions Act of 2003. Consumers can order one free copy of each of their credit reports – there are three of them, kept by credit bureaus TransUnion, Equifax and Experian – every 12 months through this website. And they won’t have to sign up for any credit-monitoring services to do so.
Here’s another interesting fact from the world of free credit report sites: Only four of the 24 free credit report sites analyzed recently by Consumer Reports were unaffiliated to each other. Consumer Reports found that nine were owned or affiliated closely with credit bureau TransUnion, while eight more were either affiliated or owned by Experian. Only four of the sites were labeled as independent by Consumer Reports.
So next time you stumble across an ad on late-night TV or on the Web for a company offering free credit reports, make sure to think before you pay a visit to its website or call one of its representatives on the phone. You want to avoid all sites that aren’t AnnualCreditReport.com. In today’s economy, you don’t need to spend money on services or features that you don’t want just to get a copy of your free credit report.
Have you found an error on your credit report?
You're not alone. In a study conducted by the Federal Trade Commission, one in four consumers found errors on their credit report. These errors can lead to unfavorable loan terms and higher interest rates on credit cards - potentially costing you thousands of dollars.
Fortunately, you can get these errors fixed by knowing the types of common errors - and where they come from.
After reading this article, you'll know how to effectively dispute mistakes on your credit report and improve your chances of getting approved for a new credit card, loan, or mortgage.
Know The Types of Credit Reporting Errors
Before you can dispute an error on your credit report, it's important to know what types of errors can occur. These are three main types of errors that can occur:
- Personal information errors
- Account-related errors
- Derogatory mark errors
Personal information errors may include incorrect name or misspellings of your name, addresses you've never used, or mistakes in employer information.
Account-related errors may include a loan that doesn't belong to you, an account listed as closed by the provider that was closed by you, or a late payment that's older than seven years.
Derogatory mark errors may include an account still showing as active even though it was discharged in bankruptcy or a collections account that shows as unpaid even though it's been paid off.
Why Do Errors Happen?
There are many reasons mistakes happen.
According to the National Consumer Law Center, the following are the three main reasons:
- Mixed files: This occurs when information relating to one person is placed in the file of someone else. Mixing files can happen when two people have similar names, Social Security numbers, or other identifying information.
- Identity theft: According to Javelin Strategy & Research, over 12 million people experienced identity theft in 2014. Identity theft poses a serious risk for inaccuracies on a credit report because any charges and new accounts are considered fraudulent.
- Furnisher errors: Companies that report information to the credit bureaus can also make mistakes. This is usually due to simple data entry errors.
Now that you know what types of error happen (and why), you're equipped to dispute any your find on your report.
What can you do when you find a mistake? Keep reading to find out.
How To Resolve Credit Bureau Errors
Did you know there are three credit bureaus that could have a mistake?
Experian, Equifax, and TransUnion each put together credit reports for consumers. Companies such as credit card issuers, debt collection agencies, and loan providers report your account information to one or more of these credit bureaus.
The credit bureaus then collect that information and record it on your credit report.
Remember: You have a right to view your free credit report once a year from each of the credit bureaus.
If you find an error on your credit report, you can dispute it with the credit bureau by mail or online. There are pros and cons to each method, but both should work.
Dispute By Mail
The traditional way credit bureaus receive complaints is by mail. The benefit of using mail is that this process is familiar to them.
To dispute an error on your credit report by mail, write a dispute letter and send it via certified mail so that you can track its shipment.
Be as clear and concise as possible. Make sure your information is accurate and provide copies of any supporting documentation such as payment records, bank statements, or court rulings.
Always include your correct return address for prompt communication.
You can also use the credit bureaus online portals for disputes and to upload supporting documentation. You will be notified of the results of your dispute via email.
Contact Information For Credit Bureaus
Below is the contact information for disputing an error with each of the three credit bureaus.Experian P.O. Box 4500 Allen, TX 75013
How To Resolve Data Furnisher Errors
In addition to resolving errors on your credit report with the credit bureaus, it's a good idea to contact the data furnisher as well.
You can go directly to the data furnisher to resolve an error and speed up the process. The data furnisher is the company that supplied the information to the credit bureau. Data furnishers include: credit card companies, lenders, utility companies, debt collection agencies, and even fitness centers.
If the error you spotted is account-related, this may be the best route.
The first thing you want to do is find the correct contact at the company. Look at the company's website for the address and contact information for filing a dispute. If you can't find it, call their customer service number and ask for the mailing address.
Make sure you include all relevant information. If the error is related to payment history, include copies of your statements that show proof of payment.
Follow Up On Your Dispute
Once you've successfully filed your dispute, you may be wondering how long it takes to process.
By law, consumer reporting agencies must investigate your dispute within 30-45 days of receiving it. After completing the investigation, the company has five business days to notify you of the results.
If you're wondering what your status is, or if they received your paperwork, call the company. It can take over a month for the dispute to be officially resolved - but knowing that they received your information can be a relief.
When you file your dispute with the credit bureau, the credit bureau will likely contact the data furnisher to settle the matter. The data furnisher will investigate the error and report back to the credit bureau. At that point, a determination will be made and the credit bureau will notify you.
When you filed your dispute with the data furnisher, the company will investigate the matter and report directly back to you.
Avoid These Common Mistakes
Getting inaccuracies corrected or removed should be simple (even if it takes some time). Avoiding these mistakes help make the process smoother and quicker for everyone involved.
Here are three common mistakes to avoid:
- Disputing by phone: When you try to dispute an error on the phone, you are at the mercy of whichever representative happens to take your call. Although the call may be recorded, you don't have any track record to follow up on.
- Disputing only with the credit bureau or data furnisher: You may be tempted to rush the dispute process to get it over with, but being thorough will improve your chances of success. Here's how: file a dispute with both the credit bureau and the data furnisher. By skipping the process of filing with the credit bureau, you risk not being able to challenge the data furnisher's determination.
- Not including supporting documentation: Good records are your key to success. If you don't include enough information to support your claim, you risk having the dispute denied. Supporting documentation includes things like payment records, bank statements, and court rulings.
In your dispute letter or on the online portal, make sure you include details regarding why the error is, in fact, wrong. Also, make sure you include evidence that proves the mistake.
Credit reporting errors are common - and approximately one in four people have at least one. Finding and correcting these errors improves your chances of getting approved for a new credit card, loan, or mortgage.
Remember: When reviewing your credit report, check your personal information and account history carefully. If you find an error, dispute it with the credit bureaus or data furnisher and follow-up to make sure it's corrected.
Make sure you check your credit report from each of the three credit bureaus every year so that you can spot and dispute any errors promptly.