How Do I Deal with Credit Reporting Errors?

When it comes to your finances, there are a few things that can have a bigger impact on your financial opportunities and future—including your ability to secure a mortgage loan, buy a car, take out a new line of credit, and more—than your credit score. Indeed, lenders will always look at your credit score before issuing a loan or line of credit, and your credit score could even be considered by a potential employer depending on the industry in which you work!

As such, it’s important to understand what a credit report is, what data is contained in a credit report, how a credit score report is read, and what to do when a credit reporting error is made. Consider the following and be sure to reach out to a financial or legal professional if you have questions.

What Is a Credit Report?

Simply put, your credit report is a summary of how you’ve handled your credit accounts, such as healthcare billing accounts, credit cards, loan payments, etc. There are three credit bureaus that provide credit reports nationwide: Experian, Equifax, and TransUnion.

Credit reports are used by potential lenders and creditors to make decisions about whether to lend to you and, if so, what the terms of a loan or credit should look like. Landlords and employers can also look at your credit report to determine whether to give you a job or a lease; regarding the latter, you could be asked to pay extra or put down more money upfront if you don’t have a good credit score.

What Data Is on a Credit Report?

A credit report contains standard information about who you are and your credit history. Typically, this includes:

• Identifying information. This section of the credit report is used to make sure that the credit report is identifying the right person. It will include your name and Social Security number.
• Inquiry information. If you apply for a new line of credit or a loan, an inquiry into your credit will be made. “Soft” inquiries are also recorded when you check your own credit report. The number of inquiries made will be reflected, with “hard” inquiries having the potential to negatively impact your credit score.
• Credit account information. This is one of the most important sections of your credit report and includes information about any and all lines of credit or loans you have open, including credit cards, student debt, mortgage loans, vehicle loans, etc. This will also show your account balances and payment history.
• Bankruptcy filings. If you’ve filed for bankruptcy, this will reflect on your report.
• Collection accounts. If you have any past-due accounts that have been turned over to a collection agency, this will be reflected on your credit report.

How to Deal with Credit Reporting Errors

Errors on a credit report are more common than most people think. Some common credit reporting errors include closed reports being reported as open, balance errors, incorrect reporting of accounts as late or delinquent, and various other data management errors. It is important that your credit report is accurate because it impacts whether or not you can borrow money and how much you’ll pay on that borrowed money.

Checking your credit report regularly is a good way to make sure that your credit is being accurately reported, as well as to check for identity theft. If you do notice an error, it’s important to deal with it immediately.

Unfortunately, while disputing mistakes is very possible and something that should be pursued as soon as a mistake is noticed, it can be a bit of a headache. Each credit reporting agency has its own process for disputing an error on a credit report—you can learn more about the dispute process on the website of the Federal Trade Commission (FTC). At the very least, disputes should:

• Be made in writing
• Include the credit bureau’s dispute form
• Include any copies of documents that support your dispute (i.e. proof that you’ve paid off an account that is showing as open or delinquent)
• Your information and contact information

Once you have filed your dispute, the credit bureau typically has one month (30 days) to investigate the error and get back to you. In some cases, it’s not uncommon for the error to originate with the business providing the credit reporting agency information, not the credit reporting agency itself. As such, if you find out from the credit reporting agency that the business has provided information that you disagree with, then you’ll need to dispute the error with the business itself. Sometimes, enlisting the services of a legal professional can help.

Fix Your Credit Reporting Errors As Soon As Possible

Again, having errors on your credit report could impact your financial future. It’s a smart idea to review your credit report regularly and take action quickly if you notice any errors.