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Did you know that as many as 20% of Americans have a mistake on their credit report? And 5% are actually getting overcharged for their credit cards, auto loans, insurance policies and more because of it.
That’s according to a study that was made in 2012 and issued by federal regulators.
Key Takeaways
- A Credit report includes your personal information, information about credit accounts, as well as payment history, and credit limit. Major credit bureaus always calculate their credit score using data from the credit report.
- Every individual in the US has a right to obtain a free credit report from three major agencies once a year. This allows you to check whether there are any errors in the report.
- To fix any errors in the credit report you have to contact each of the three major credit bureaus by online or post, showing where is the error and how to correct it. Bureaus expect some kind of proof from customers for that error as well as a piece of evidence for the correct information.
- After filing a dispute, you have to wait for the bureau to complete its investigation. If they find an error, it typically can take up to 30 days for the bureau to correct the error and update the report.
What Is A Credit Report?
A credit report is a document that contains details about your credit history and current financial position, such as loan repayment history and credit account status.
The majority of people have multiple credit reports. Credit reporting organizations, also known as credit bureaus or consumer reporting agencies, collect and maintain financial information about you that creditors, such as lenders, credit card companies, and other financial institutions, send to them. Creditors aren't obligated to report to all credit reporting agencies.
Lenders utilize these reports to determine whether or not they will lend you money and, if so, at what interest rates. Lenders also use your credit report to see if you are still meeting the requirements of an existing credit account.
Other companies may use your credit reports to decide whether or not to sell you insurance, rent you a home or apartment, or supply you with cable TV, internet, utility, or cell phone service. Your credit report may be used to make job decisions if you allow an employer to look at it.
Equifax, Experian, and TransUnion are the three credit bureaus that provide credit reports nationally. Some lenders and creditors may not report to all three, so your credit reports from each may differ. Some people may only report to two people, one person, or none at all.
What Does a Credit Report Include?
Credit reports often contain your personal information (such as your name, birthday, address, SSN etc), information on your credit accounts – mortgage, loans, payment history, the date the account was opened & closed, your balance, and even your credit limits. It also includes collection items such as bankruptcy & foreclosures as well as your inquiries – companies that have accessed your credit report.
For a variety of reasons, such as closed accounts that have dropped off your report after a set length of time or accounts not reported to the credit reporting agency by lenders, it may not contain all of your credit accounts.
Why You Should Fix Errors In Your Report?
The information on your credit report can effect your purchasing power and your ability to find work, rent or buy a home, and purchase insurance.
- Businesses use the information in your credit report to decide whether to lend you money, extend you credit, provide you with insurance, or rent you a home.
- Credit reports are used by some employers when making hiring decisions. The amount you will have to pay to borrow money is also influenced by the strength of your credit history. You'll want to double-check that the data in your report is correct and full.
- Incorrect information may appear on your credit report, affecting your ability to obtain credit, insurance, or even a job. Checking your credit report might also help you detect identity theft. This occurs when someone uses your personal information without your authorization, such as your name and address, credit card or bank account details, Social Security number, or medical insurance account numbers.
Information that is incorrect or incomplete in your credit report must be corrected by both the credit bureau and the business that provided the information to the credit bureau.
They also have to perform it for no charge. Contact the credit bureau and the company that reported the incorrect information to fix any errors on your report. Inform them that you would like to dispute the material in your report.
Fix Credit Report Errors In 5 Simple Steps
You can dispute and fix credit report errors and have them removed from your record in 5 steps:
1. Check Your Credit Report
The first thing is that you have to actually look at your credit report. There are three major reporting bureaus, Experian, Equifax and TransUnion. And you’re entitled to a free copy of each of their reports every 12 months. You just request it through AnnualCreditReport.com. Then, check these things:
- Incorrect address or employer
- Incorrect spelling of your name
- Open accounts being reported as closed
- Outdated information
- Only your accounts are listed in your account history
- Negative information that is outside of the reporting limit
- Accounts that you have are all listed
- Bad debts that are required to be removed have been
- All bankruptcy debts that have been discharged are marked appropriately
- Inquiries are accurate
If any of the information in these areas or any others are incorrect or even incomplete you want to look at each report to see which ones are reporting it. If the information is on all of your reports you’ll need to approach all of them.
Also, if it’s not then you only need to look at the ones that are showing. Not all of your reports are going to look exactly the same.
The next thing you’re going to need is evidence of what you’re going to show them. You need documents that are related to the accounts or information and you need to have multiple copies available. The first time you send those copies out you may not get a response and you’ll have to try again.
2. Gather The Relevant Details
With each of these bureaus, you’re going to have the opportunity to report a dispute either online or through the mail. But when you send out that dispute makes sure you do each of these things:
- Make sure to include your full name, address, date of birth and social security number
- Include previous names and addresses that were used at the time of the disputed information
- Include all information about the account you are questioning including address, account number, account opening, creditor name, etc.
- Instructions on what is incorrect and what you would like them to do about it
- Notes or reference to the document copies that you have included
3. Contact The Bureaus
As soon as you know about an error you want to make sure you contact the bureau that’s reporting it.The Consumer Financial Protection Bureau recommends that you reach out to them directly.
You can draft your own letter with this information or you can choose to use a sample letter from the CFPB website. No matter what you decide to do make sure you include information about how to contact you, why the information is wrong, and what, you want, them to do about it.
Then, make sure you have all of your supporting evidence. You should always keep a copy of anything you send to these bureaus, so you have a record and if possible, send it certified through the mail. This means that you’ll get a return receipt when it’s received.
If there’s a mistake that your lender reported you want to make sure you contact them as well. If they’re reporting mistakes it could very well happen again, after you’ve gotten it cleared up with the credit bureau and you definitely don’t want that.
You also want to make sure that you get proof of any changes that are made to your credit report. The bureaus are required to send you an updated credit report when they make changes at your request.
Each time you send out a letter the credit bureau is required to investigate the information you claim. They have to do this in 30 days and they have to let you know what their findings are, whether in your favor or not.
4. Review The Bureaus Investigation
Your results must be provided in writing and you must get a new copy of your credit report, for free, if there are any changes to your report as a result of the dispute. Not only that but the credit bureau is required to let you know who reported the information, including their name, address and phone number.
When the investigation takes place the credit bureau will update your credit report within approximately 30 days, if they find that information is inaccurate.
If the information is accurate, however, they are not able to remove it. It’s up to you to continue a dispute if you still believe the information is incorrect but you’ll want to add in more information and documentation to back it up.
Whoever reports the incorrect information is required to notify the credit bureau as well. They are required to tell the credit bureau to update or to remove any information that they find to be inaccurate and they must make sure they notify any credit bureau that they reported the information to.
Keep in mind that even if the information is found to be accurate or the furnisher of the information insists that it is correct you can add a statement on your file to explain your dispute.
5. Follow Up
For those occasions where you are not granted any change to your credit report you can request to add a ‘statement of dispute.’ This statement will show up for anyone who decides to pull your credit report. Still, any negative information will eventually be removed from your credit report on its own as it ‘expires.’ That means it’s going to start being less important to your overall score.
If you do get an inaccurate item removed make sure you take another look at your credit report, even after the bureau has sent you one.
You want to make sure that the updates happen quickly and that the incorrect information is actually gone. It might take time for this to happen but if it takes more than a couple months make sure you contact everyone involved again to make sure that it’s done.
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Mistakes To Avoid When Disputing Credit Reports Errors
There are a couple of mistakes you should be aware of when you dispute errors on your credit report:
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Not Knowing Your Report
You need to make sure you’re very clear on what your report is saying and what it means before you dispute anything.
If you don’t know how to read the report you may dispute something that’s accurate or choose not to dispute something that’s inaccurate.
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Not Supplying the Right Information
You’ll need to support your claim that the information in your report is inaccurate and that means you need proper documentation.
If you don’t have the right documentation your claim could be denied without even really looking into it.
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Filing a Dispute Before a New Application
If you dispute something it means that the item may not be taken into account when your score is being calculated for up to 30 days. After all, that’s how long the credit bureau has to respond and investigate your claim.
As a result, when you’re applying for something new you may not get the full score that you would otherwise because of information that’s being held.
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Sending the Dispute Directly to the Lender
You want to dispute the information that’s being reported on your credit report directly to the reporting bureau. Yes, that information actually came from a lender, but that doesn’t mean they can get the problem resolved faster.
If you don’t approach the right individual person your information may not get where it needs to or information may not be investigated properly. Credit reporting bureaus have a process that they follow to investigate your claims and that’s going to make the process much simpler.
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Missing Focus in Your Dispute
Explain exactly what you’re disputing and why you believe it to be incorrect. The clearer and more concise you are about what you see the easier it’s going to be for the credit reporting to investigate and that means they’re going to get through the process much faster.
Three Most Common Credit Report Errors
The three most common credit report errors relate to:
- Personal information: Personal information can be small details such as a name misspelling, incorrect contact details, or other basic facts about your personal identity.
- Mistaken accounts: Mistaken accounts can be situations where an account for a loan or retail credit card is opened under your name, but it is not actually yours. These mistakes can occur due to identity theft or clerical error.
- Account reporting: these errors relate to the actual status of an account. For example, an account may be reported closed, or timely payments are reported as late. There may also be incorrect credit limits, balances, or payments reported.
How Long Does it Take to Correct an Error?
If you do find an error on your credit report, you will need to file a dispute with the credit reporting agencies. The agencies must investigate disputes within 30 days of receipt and need to notify you of the results within five business days after completion.
However, there can be extensions to this timetable. For example, if you need to submit additional information for the dispute during the initial 30 day investigation period, it can be extended for 15 additional days.
So, once you report an error, you should see it corrected within approximately 45 days.
Does Fixing Credit Report Errors Affect Credit Score?
Your credit reports and credit scores are not the same things. A credit report is a document that contains details about your credit history and current financial position, such as loan repayment history and credit account status.
The information in your credit report is used to determine your credit ratings.
Your credit score and the information on your credit report are crucial in determining whether you'll be approved for a mortgage, credit card, auto loan, or another type of credit, as well as the interest rate you'll pay. The information in your credit report is used to determine your credit ratings.
Numerous credit ratings are available to you, and multiple methods for obtaining a credit score. The credit reporting agency that provided the information, the scoring algorithm, the type of loan product, and even the day it was generated can all affect your score. Higher scores indicate a better loan repayment history and qualify you for reduced interest rates.
In this chart using Experian data, you can see the average FICO score has increased significantly over the last decade.
Fix Errors and Mistakes in Your Credit Report - FAQs
What is the best reason to dispute a credit report?
The only reason to dispute your credit report is if there is an error. Even something minor such as your name misspelled could have an impact on your overall report and credit score. So, the best reason to file a dispute is if you find any mistakes. Check the details of each account carefully to ensure that the balance, payment history, credit limit and your personal details are correct.
Can you dispute a debt if it was sold to a collection agency?
When a debt is sold to a collection agency, the agency is required by law to contact you with a formal letter detailing the name of the creditor and the amounts owed. However, it should also detail that you can dispute the debt and if you fail to dispute it within 30 days, the collection agency will assume the debt is valid.
This means that you can dispute the debt, but you will need to put it in writing within 30 days. The collection agency will then need to provide verification of the debt. When you file the dispute, the collection agency must stop all collection activities until the debt is verified.
Why is it so important for your credit report to be completely accurate?
A credit report is a vital piece of information for your financial wellbeing. It provides a record of your current and past accounts, the totals you owe and your payment history for each account. The credit agencies use this information to calculate your credit score, which will determine whether you will be approved if you apply for a new credit card, loan, mortgage or other financial product.
The credit agencies use a variety of details from your credit report to generate a score. For example, your credit usage is an important factor in lending decisions. So, if a credit limit on one of your accounts is reported incorrectly, it may have a detrimental impact on your credit usage rate.
What does a credit report include?
A credit report provides a summary of how you handle your credit accounts. It includes a number of details including:
Your identifying information such as your name, address, date of birth and social security number.
Your credit account information; this includes the type of account, the date the account was opened, the credit limit, account balance and payment history.
Any inquiry information; potential lenders make an inquiry when you apply for a new service or credit account. These inquiries can remain on your credit report for up to two years and can provide an insight into how well you’re managing your money. For example, if you’ve applied for multiple credit cards within a short period, potentially lenders may view this as a red flag. The exception to this is soft inquiries, which do not trigger a mark on your credit file.
If you have any bankruptcies or collection accounts with details such as bankruptcy chapter and filing dates.
Can you hire someone to check your credit report?
While it is possible to give your consent for organizations to check your credit report, these usually relate to credit applications. You may be able to access assistance for checking your credit report, but it may be simpler to request a copy and check the details for yourself. You are more likely to be able to spot any errors, since you will be more familiar with your personal and financial details.
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