How to fix errors on your credit reports and how they occur
To err may be human, but if that human error negatively affects your credit worthiness, you're not alone. The number one complaint received by the Consumer Financial Protection Bureau (CFPB) involved incorrect information listed on consumers' credit reports. Of those complaints, errors on a credit report were at the top of the list.
Worse yet, 26% of participants in a study by the Federal Trade Commission (FTC) identified at least one error on their credit report that could make them appear riskier to lenders. The potential negative impacts those errors can have on your credit report can be catastrophic on your ability to get loans, new lines of credits, or better lending terms and interest rates.
That's why staying on top of the content of your credit reports is so important. In this section, we'll reveal some of the most common mistakes found in credit reports, how to fix them, and what to do if you disagree with any of the information in your report.
Common mistakes that cause credit report errors
To begin, it's important to know if the person responsible for the error is you. Often, a person may have applied for credit under different names (Robert Jones and Bob Jones, or Dan, Danny, or Daniel Smith, etc.). Make sure you're consistent and always use the same first name and middle initial, otherwise your report may actually contain information about another person with a similar name. Likewise, apply the same consistency and care with things like your Social Security number and address.
Or it could be a case of what you didn't put in your report. If you were denied credit because of an "insufficient credit file" or "no credit file," it may be because your credit file doesn't reflect all your credit accounts. Though most national department store and all-purpose bank credit card accounts will be included in your file, not all creditors voluntarily supply information to the credit bureaus, nor are they required to report consumer credit information to credit bureaus.
If you find missing accounts, ask your creditors to begin reporting your credit information to credit bureaus, or consider moving your account to a different creditor who does report regularly to credit bureaus.
Other common errors to look for:
- Someone else made a clerical error in reading or entering your name or address information from a hand-written application.
- Similarly, loan or credit card payments may have been inadvertently applied to the wrong account.
- Errors may have lenders seeing double because
- accounts have been reported more than once, making it appear you have more open lines of credit or higher debt than you actually do.
- If you closed a credit account, make sure that your report does reflect that it was "closed by grantor" making it appear that the creditor closed the account, and not you.
- If you're divorced, make sure that your former spouse's debts are not reflected on your report.
- Likewise, make sure that older bad debts that should have been removed from your credit report have been, because credit-reporting companies should remove them from your report after seven years.
- Finally, mysterious accounts and bad debts could be the work of identity thieves who have gotten ahold of your personal information.
Fixing credit report errors
To ensure mistakes are corrected as quickly as possible, contact both the credit bureau and organization that provided the information to the bureau. Both these parties are responsible for correcting inaccurate or incomplete information in your report under the Fair Credit Reporting Act.
Keep in mind that all three of the credit bureaus now accept the filing of disputes online, with Experian now only accepting online submissions.
Find out how to initiate a dispute online.
Begin by telling the credit bureau what information you believe is inaccurate. Credit bureaus must investigate the item(s) in question-usually within 30 days-unless they consider your dispute frivolous. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your communication should:
- Clearly identify each disputed item in your report.
- State the facts and explain why you dispute the information.
- Request deletion or correction.
You may also want to enclose a copy of your report with the items in question circled. Your communication may look something like this sample.
If mailing a letter, send it by certified mail, return receipt requested, so you can document that the credit bureau did, in fact, receive your correspondence. Also, keep copies of your dispute letter and enclosures. If you want help disputing mistakes on your credit report, myFICO can help you write a free letter in minutes.
Next, write to the appropriate creditor or other information provider, explaining that you are disputing the information provided to the bureau. Again, include copies of documents that support your position. Many providers specify an address for disputes.
If the provider again reports the same information to a bureau, it must include a notice of your dispute. Request that the provider copy you on correspondence they send to the bureau. Expect this process to take between 30 and 90 days.
In many states, you will be eligible to receive a free credit report directly from the credit bureau, once a dispute has been registered, to verify the updated information. Contact the appropriate credit bureau to see if you qualify for this service.
How will accepted disputes affect your FICO Score?
Often your score will improve when errors on your credit report are corrected. In some situations, however, your score may not improve when credit information is corrected or updated. For example:
- It is often thought that closing credit card accounts will improve your score. This is not true. Closing an account will neither remove it from your credit report, nor will it prevent the payment history from continuing to be displayed and considered in the calculation of your FICO Score.
- Removing negative information from your credit report may not have the impact on your FICO Score that you expect. There could be additional negative information remaining that will prevent an immediate increase in your FICO Score.
- FICO Scores only consider credit-related information on your credit report. If you change personal information (address, SSN, employer, date of birth, etc.), the credit information on your report will not be impacted and your FICO Score will probably not change. The FICO Score only considers credit account, collection, and public record information.
It typically takes the credit bureau 30-45 days to respond to your dispute.
What if you disagree with the credit bureau's investigation?
Credit bureau investigations are not always resolved in your favor. If that's the case, ask the credit bureau to include your statement of the dispute in your file and in future reports. If requested, the credit bureau will also provide your statement to anyone who received a copy of the old report in the recent past. Though there is usually a fee for this service, it's probably worth the cost.
If you tell the information provider that you dispute an item, a notice of your dispute must be included anytime the information provider reports the item to a credit bureau while that dispute is being investigated.
Finally, if the investigation does not produce the results you feel are correct, and inaccurate information in your credit report is causing you harm, you may consider hiring a lawyer to help resolve your dispute as a last resort.
The secret to success is to be vigilant and tenacious when it comes to reviewing, repairing, and correcting the record regarding your credit reports.