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.

Bankruptcy and Your Credit Report

Making the decision to file for bankruptcy to manage debt is never an easy thing to do. Even when bankruptcy is the best choice for a debtor, it’s usually a last-resort option. And while bankruptcy can provide a huge sense of financial relief and provide someone with the ability to discharge their debts, bankruptcy also has some consequences. One of the most significant consequences of bankruptcy is that it will negatively impact a debtor’s credit report. Here’s an overview of what you should know about bankruptcy and your credit report before you file for bankruptcy.

Bankruptcy Basics: An Overview

Before diving into how bankruptcy may impact your credit report, it’s important to understand the purpose of a bankruptcy filing and the types of bankruptcy. The two most common types of bankruptcy for individuals are a Chapter 7 bankruptcy and a Chapter 13 bankruptcy.

  • Chapter 7 bankruptcy, or liquidation bankruptcy, is designed for debtors who have no source of income and therefore cannot repay any or a significant portion of their debts. Through this bankruptcy type, nonexempt assets will be liquidated, and remaining debts will be discharged.
  • Chapter 13 bankruptcy, or a wage-earner’s plan, is for debtors who have some source of income and therefore are able to enter into a repayment plan that lasts for 3-5 years. Those who file for Chapter 13 bankruptcy will usually be able to keep more assets than those who file for a Chapter 7 bankruptcy.

How Can Filing for Bankruptcy Impact a Credit Report?

While filing for bankruptcy can provide much-needed financial relief and how a person starts over financially, bankruptcy will impact your credit score.

While most people who file for bankruptcy already don’t have a very high credit score, filing for bankruptcy will ding your score even more, causing it to drop by 100 or more points. In fact, the higher your score is at the time of your filing, the more points that it will drop by when you file for bankruptcy.

Another thing to think about is that not only will your score immediately be impacted by your bankruptcy filing, but also that the bankruptcy filing will remain on your credit report for years to come. Under federal law, a Chapter 7 bankruptcy will remain on your credit for 10 years, and a Chapter 13 bankruptcy will stay on your credit report for seven years.

How Will Bad Credit Impact Me?

If you’re familiar with bad credit, you may not be too concerned about your credit score dropping even lower after a bankruptcy filing. While the benefits of filing for bankruptcy may certainly outweigh the drawbacks, it’s important to know that a bad credit rating can make it more difficult to re-establish yourself and grow financially. A low credit score will likely impact you in the following ways:

  • Make it difficult or impossible for you to open new lines of credit/get a new credit card, or secure a loan or mortgage
  • Result in higher interest rates if you are able to secure a loan/line of credit
  • Potentially cause your insurance premiums to rise through credit-based insurance scoring
  • Make it more difficult for you to rent an apartment
  • Potentially prevent you from securing certain jobs—for some careers, an employer may pull a credit report to inform a hiring decision

Building Credit After a Bankruptcy Filing

While taking a hit to your credit score isn’t ideal, the good news is that you can start building credit after a bankruptcy filing. With a strong financial strategy in place, you can overcome the consequences of bankruptcy and begin building wealth again. Here are some tips for rebuilding your credit after a bankruptcy filing:

  1. Know your credit score. The first thing to do is to familiarize yourself with your credit score and your credit report. If you notice an error in your report, consider meeting with an attorney regarding your options for resolving the error.
  2. Make all payments on time. If you do have any open lines of credit or loans, make sure you always make all of your payments on time and in full. Making on-time payments is one of the best ways to rebuild your credit.
  3. Consider a secured credit card. While it’s hard to get approved for a credit card after filing for bankruptcy, your bank may approve a secured credit card. A secured credit card is a credit card that requires a security deposit in order to open.
  4. Keep your credit utilization rate low. If you’re recovering from a bankruptcy filing, keeping your debt in check is crucial, so you should be careful about putting too much on your credit card. By keeping your credit utilization rate low, you’ll also help your credit score.

Learn More About Bankruptcy Today

If you have questions about filing for bankruptcy or life after bankruptcy, reach out to Gulf Coast Bankruptcy Attorney through our online contact form and we can help you schedule a consultation with an experienced Mississippi Bankruptcy Attorney. We are here to help you.