Five Common Credit Report Mistakes and How You Can Fix Them
A recent report from the Federal Trade Commission (FTC) found that 5 percent of consumers had errors on their credit reports and 26 percent of the people in the study had an error that could affect their ability to get credit or a better interest rate.
What does this mean for you? Be proactive and check your credit report once a year. The Fair Credit Reporting Act requires the three credit reporting companies to provide a free copy of your report each year. It is important, however, to make sure you request your reports from annualcreditreport.com or call 1-877-322-8228, because there are many companies that use similar web addresses or offer "free" credit reports, but charge a fee for this service.
What Are the Most Common Errors?
The most common types of errors you should be on the lookout for include:
- Incorrect information: Make sure your name is spelled correctly and the right middle initial is used. If this is incorrect, there could be information on your report from another person with a similar name. Also review your address, employment information and Social Security number.
- Accounts listed as closed by lender: If you closed a credit account, make sure that your report does not list it as "closed by grantor". This means that the lender closed the account, not you, and can have a negative effect on your creditworthiness.
- Bad debts older than 7 years: After seven years, credit reporting companies are supposed to remove bad debts from your report. If you've ever filed for bankruptcy, discharged debts also should not be on your report, though the bankruptcy will be.
- Duplicate accounts: Sometimes accounts are reported more than once. That makes it look like you have more open credit and higher debt.
- Debts from an ex-spouse: If you're getting divorced, take your name off any joint accounts so you won't be liable for future debts and check your credit report after you're divorced to make sure no new debts from your ex are added to your record.
How to Correct Credit Report Errors
It takes time and patience, but it is well worth it to correct credit report errors. There are several steps you should take:
- Write, don't email or call, the credit reporting company: While all three companies offer the option to dispute errors online or by phone, most experts recommend mailing a certified letter so that you have documentation in case your dispute isn't resolved. You should explain what the error is, include photocopies of any documents that support your claim and ask them to remove the error. You can also include a copy of your report with the error highlighted. Keep copies of your letter and all documents.
- Contact the source of the error. You may also want to send a dispute letter and copies of supporting documents to the lender who reported the error and ask them to correct it.
- Write one letter per error. If you find multiple errors, address each one in a separate letter. Credit monitoring companies sometimes dismiss longer lists of disputes as frivolous and don't take action on them.
By ensuring your credit report is accurate, you're making a smart move to protect your financial future.
This article is for informational purposes only. For personalized financial advice, you should contact a qualified financial advisor.