Your credit report is an important document that reflects your financial history and impacts your ability to get credit or secure favorable interest rates. Common errors on your credit report damage your credit score and have an adverse effect on your overall financial health.
Unfortunately, no matter how meticulous you are, your credit report could have one or more errors due to no fault of yours. Some errors may be caused by a merchant reporting an inaccurate transaction. Others may be caused by a merchant failing to report an activity such as a loan payment. Regardless of the exact cause, a wrong entry in your credit report will potentially damage your creditworthiness.
Knowing what are some of the common credit card errors and how to correct them can help keep protect your financial history.
Common Credit Report Errors
Credit report errors can be grouped under three main categories: incorrect personal information, incorrect account information, and incorrect balances recorded.
Category 1- Incorrect Personal Information
Errors in personal may include:
- Misspelled Name. A typo can cause your name to be misspelled, leading to confusion and the potential risk of identity theft.
- Inaccurate Addresses. Outdated or incorrect email or postal addresses listed on your credit report can cause communication issues and make it difficult for lenders to verify your identity.
- Wrong Social Security Number. Even one wrong digit when entering your Social Security number on your credit report can lead to inaccurate information being associated with your credit history.
Category 2 – Inaccurate Account Information
Errors in account information may include:
- Account Status Errors. Your credit report may incorrectly indicate that an account is open when it has been closed or vice versa. This can impact your credit utilization ratio and affect your credit score.
- Accounts Mistakenly Associated With Yours. There may be accounts listed on your credit report that do not belong to you, potentially due to mistaken identity or errors made by the credit bureaus. These can increase the amount of debt you have, potentially damaging your credit.
- Duplicate Accounts. Credit report errors can occur when the same account is reported multiple times by different creditors or lenders. This duplication can artificially inflate your debt and negatively impact your score.
- Erroneous Payment Histories. Your credit report may display incorrect information about your payment history, such as missed payments or late payments that you actually made on time. This can impact your credit score significantly.
- Closed Accounts. Closed accounts that are still being reported as open on your credit report can impact your credit utilization ratio and lead to lower credit scores.
- Unresolved Negative Items. Your credit report may not reflect resolved negative items, such as paid-off collections or judgments. This outdated information can damage your creditworthiness.
Category 3 – Inaccurate Balance Information
Errors under this category may include:
- Inflated Outstanding Balances. Duplicate accounts can result in inflated outstanding balances, leading to a high debt-to-income ratio, potentially damaging your creditworthiness.
- Incorrect Credit Limits. If the credit limit listed on an account is lower than it actually is, it can affect your credit utilization ratio negatively and provide a negative overall picture of your creditworthiness.
It’s important to address these credit report errors promptly to ensure that your credit profile is accurate.
7 Steps to Correct Errors On Credit Report
Correcting errors on your credit report does require you to be proactive and look for errors. It does take some time and you will have to follow up but it’s worth it.
Here’s the step-by-step process of how to correct credit report errors:
Step 1: Obtain Your Credit Reports
The first thing you’ll need to do is request free copies of your credit reports from each of the three major credit bureaus – Equifax, Experian, and TransUnion. You’re entitled to receive one free report every year from each of the bureaus. You can submit a request for your reports at AnnualCreditReport.com.
Step 2: Review Your Reports
Go through each credit report thoroughly. Check each entry in the personal information and account details sections. Make sure there are no typos or wrong dates. Pay special attention to any suspicious or unfamiliar entries. If you do come across any error or information that doesn’t look familiar, make a note of it. Include all details such as the names and numbers of the accounts against which the inaccurate information is recorded. Also, make a detailed note of the accurate information.
Step 3: File a Dispute with the Credit Bureau
Contact the credit bureau(s) in writing, clearly explaining the error/s. Make sure to provide the necessary documentation to support your claim. Attach relevant documents, such as account statements or payment records. Do not attach your originals when filing this dispute. Keep the originals in case you need them later on.
Step 4: Notify the Creditor
If the error is related to a specific creditor, notify them directly about the discrepancy in writing. Include the same supporting documents as mentioned earlier. This may help speed up things if they agree that they made a mistake and take steps to correct the entry.
Step 5: Follow up
Credit bureaus are required to investigate your dispute within 30 days. If the bureau fails to correct the errors and inform you within that time window, follow up with additional documentation and escalate your case if necessary. Keep copies of all correspondence, including dispute letters and supporting documentation, as proof of your efforts to correct credit report errors.
Step 6: Request a Fraud Alert or Credit Freeze if Necessary
This step is only if you discover signs of identity theft, such as unfamiliar accounts or inquiries. In this case, you should immediately place a fraud alert or credit freeze on your credit reports to protect your information. Identify thefts can cause untold damage to your credit.
Step 7: Monitor Your Credit Regularly
If you find and report any errors, you must monitor your credit report to make sure that the changes have been made and the information is reflected correctly. It’s important to continue monitoring your credit reports regularly to detect any new errors promptly. Consider using credit monitoring services or apps that can help you track changes in your credit report and notify you of any suspicious activities.
In complex cases or if you feel overwhelmed, consult a reputable credit repair company to assist you in the dispute process. Remember, they cannot do anything that you cannot do yourself. A credit repair company cannot affect the decision or help you correct an entry if you don’t have supporting documentation. The only reason to pay a third person to help you file a dispute is if you find the process unduly stressful.
Your credit report plays a vital role in your financial life, and it is essential to ensure its accuracy. Understanding common credit report errors and following the steps mentioned above is key to maintaining a healthy credit profile.