Credit reports often contain mistakes, caused by you or your lenders. Either way, you need to get them fixed if you want to obtain credit in the future.
Here’s how credit report errors happen and how you can fix them.
My credit report contains errors — how did they get there?
You’re entitled to a free credit report every 12 months from each of the three major credit bureaus; get them by using AnnualCreditReport.com. When you request them, be prepared. According to an FTC study from December 2012, 26% of consumers have one or more potentially material errors on their reports.
Most credit report mistakes are human error, either by the consumer or the lender. For instance, if a person applies for credit under multiple names (like Christina Smith who goes by Tina Smith) or transposes two numbers in his or her Social Security number, it may not be reported correctly. Also, the lender may make clerical errors on personal information, which can keep things from being reported accurately.
Errors can also exist if loan or credit card payments were accidentally applied to the wrong account. This is why information may be missing from your report and incorrectly showing up on someone else’s report.
Why should you care about fixing these errors?
Your credit report information is put into an algorithm to calculate your credit score, which lenders use to determine your creditworthiness. This means if there are any inaccurate negative records on your report, they can keep you from obtaining credit with favorable terms.
Even if you aren’t planning on taking on any debt, you may need credit for other reasons. Your credit reports can determine whether you get approved for an apartment, a cell phone or even a job. Regardless of your financial situation and debt needs, you want to make sure your credit reports are accurate and your credit score is high.
There are three major credit reporting bureaus — Equifax, Experian and TransUnion — and one, two or all of their reports may contain errors. Because you typically won’t know which bureau a lender will pull a report from, it’s important that you request copies of all three reports for free annually and check each for discrepancies.
What do you do if you find errors?
If you find mistakes on your credit reports, you’ll want to gather documentation and dispute the errors with the credit bureaus reporting them. For most errors, the bureaus have to respond to a dispute within 30 days. If the matter doesn’t get resolved, you may have to escalate it to the Consumer Financial Protection Bureau or the Better Business Bureau.
After clearing up any discrepancies, continue monitoring your credit. Make sure the error has been removed, and keep an eye out for potential errors in the future.
Regardless of where your credit report errors came from, it’s important to get them fixed. Take the time to resolve any discrepancies so you won’t have a problem getting credit with favorable terms when you need it.
This article was updated Sept. 29, 2016.