Back several years ago, my wife and I both requested copies of our credit reports (get yours at www.annualcreditreport.com). Mine was correct. Hers was not. She and her older brother have the same initials, lived at the same addresses, and obviously have many other data points in common. It wasn’t difficult to get these errors corrected, but it did take some time. Thankfully, I had been employed in a financial services firm and had experience reading the mish-mash of data that’s on a credit report.
How many credit reports contain errors? Estimates range from 25 percent to 75 percent and, though most errors are of no real consequence, there are a few than can hurt your credit score and by default, hurt you in a multitude of ways financially.
Why should you review your credit report?
To build a better credit score
Your credit report is simply the raw data of who you are, where you’ve lived and worked, where else you’ve applied for credit, and how well you’ve paid your creditors – data that is unedited and unfiltered. Your credit score is that raw data compiled and examined. It’s the explanation of your credit report to people who don’t have time to examine the nitty-gritty details. Both credit scores and credit reports are important to review, so don’t neglect reviewing either.
To discover and correct errors
Credit report errors can cause your applications for credit, employment car insurance, or housing to be delayed or even denied unexpectedly (and unfairly). Order and review all three of your credit reports and all three of your credit scores at least six months in advance of applying for any major loan. This will allow you enough time to dispute any errors that you might find. It will also give you time to prepare an explanation for any remaining inaccuracies to a potential creditor.
To get a snapshot of how creditors see you
Your credit report can help you anticipate how creditors will view you as a potential borrower, renter, insurance risk, or even employee. Once you’ve identified any weaknesses in your credit report, you can work to resolve them and improve your appeal in the eyes of creditors.
To become aware of identity theft in its early stages
Most people don’t know they’ve been a victim of identity theft for months or even years after their identity is initially stolen. The sooner you recognize and address identity theft, the less damage will be done to your credit and your finances.
What to Look For in Your Credit Reports
The credit reporting industry collects and assembles billions of pieces of credit history information every month. Just the sheer volume of information guarantees that errors and outdated information occasionally show up. Be sure to look over every part of your credit report carefully and mark down any errors you find. If you find an error in a report from one credit bureau, make sure to check the others for the same error, since you’ll have to correct each error in each report. In particular, look for the following:
Under Identifying Data:
- Incorrect or misspelled name.
- Other inaccurate identifying information, such as a wrong Social Security number, marital status, birth date, or address.
- Outdated or incorrect employment information.
Under Credit History:
- Accounts that are not yours.
- Accounts that are reported more than once, especially accounts in bad standing.
- Incorrect account histories, such as late or missed payments that you paid on time.
- Late payments that are more than seven years old (after seven years they should disappear automatically from your credit report).
Under Credit Inquiries:
- Credit inquiries that you didn’t initiate.
- Credit inquiries that are more than two years old.
Under Public Information:
- Paid liens or court judgments that are listed as unpaid.
- Accounts that were charged off through bankruptcy but are still shown as past due.
- Paid liens or court judgments that are more than seven years old.
- A bankruptcy that’s more than 10 years old or isn’t listed by its specific chapter (7 or 13).
- Collection accounts or charge offs (other than a bankruptcy) that are more than seven years old.
These are HUGE, damaging, entries to anyone’s credit report. Avoid them if you possibly can.
Evidence of Identity Theft
In some cases, a mistake on your credit reports may not be the result of simple human error but is actually a giant red flag for identity theft. The most common credit report errors stemming from identity theft are:
- Accounts you didn’t open.
- Unauthorized changes to familiar accounts.
- Authorized account users you didn’t authorize.
- Credit inquiries you didn’t initiate.
- Addresses where you haven’t lived.
If you think you may be a victim of identity theft, you must act immediately to protect your finances and your credit.
When You Find an Inaccuracy on Your Credit Report
The credit bureaus are required by law to investigate and correct inaccurate or incomplete information in your credit report once they have been notified of the errors (generally 30 days or less). For the record, accurate information CANNOT be removed except by the passage of time or the benevolence of the creditor. Anyone who convinces you otherwise is simply after your money. Attempting to remove accurate information could be considered fraud and could be prosecuted. Inaccurate information CAN be removed and the credit bureaus will willingly remove it once the inaccuracy is substantiated.
Follow these three steps to make sure the credit bureaus resolve any problems with incorrect information in your report:
- File the dispute: Complete and return the dispute form that came with your credit report, or file the dispute online at the credit bureau’s website (listed above). Include any documentation that supports your claim. Avoid disputing more than three items per form: disputing too many entries at once may cause the credit bureau to dismiss your claims as frivolous. Instead, wait until your top three most egregious errors are corrected, then move on to the next three.
- Wait for a response: The credit bureau is legally required to conduct an investigation into your claim and respond to you within 30 days. If your claim is verified, the credit bureau must correct the information and provide you with a free copy of your updated credit report.
- Verify the changes: After any errors have been corrected, wait a few months and then request your credit report again. Check to make sure that the disputed information has been removed.
Reading your credit report isn’t glamorous
But it’s a necessary part of making certain your financial reputation is kept accurate and intact.