Before You Apply For A Mortgage Or Car Loan Check Your Credit Files For Errors That Could Derail Your Plans
Illustration by Raul Arias
Inaccurate information on your credit reports could hurt your credit score, and errors are not uncommon. Complaints to the Consumer Financial Protection Bureau about the major credit reporting agenciesEquifax, Experian and TransUnionskyrocketed in 2020, and the majority concerned incorrect information, according to a report from the U.S. Public Interest Research Group.
Under the Fair Credit Reporting Act, you have a right to dispute information in your credit reports that you believe is inaccurate. Unfortunately, however, you cant just send a complaint to the CFPB and watch the mistakes magically disappear. You need to take specific steps to get the credit agencies to scrub errors.
Disputing an error. If you find an error, you have three options: Call the toll-free number provided on the report, fill out the bureaus online dispute form or write to the bureau. Experts suggest starting with the online form. Its typically the easiest to do, and you can attach documents, such as bank or credit card statements or letters from your lender, to support your contention that the information on your report is wrong.
What’s In Your Credit Reports
A credit report may include basic information about a consumer’s debts, creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living. The data in the reports from the different credit reporting agencies can vary to some degree, depending on which company produces the report.
Wait Up To 45 Days For The Credit Bureau Or Furnisher To Investigate And Respond
The credit bureau generally has 30 days after receiving your dispute to investigate and verify information with the furnisher. The credit bureau must also report the results back to you within five days of completing its investigation.
If you dispute the error with the information furnisher, that company must also report the results of its investigation to you. It also typically has 30 days to investigate. But if the furnisher stands by the accuracy of the information it reported, it wont update or remove the error.
One more thing to note is that either the credit bureau or the furnisher may decide that your dispute is frivolous. This generally happens when youve submitted incorrect or incomplete information on the dispute, but can also occur if youve tried to contest the same item multiple times without any new information or if youve attempted to claim that everything on your credit report is incorrect without proof.
If the bureau decides that your dispute is frivolous, it doesnt need to investigate it further as long as it communicates that to you within five days, along with the reasoning for deeming the dispute frivolous. If your original dispute was labeled frivolous, you can try to resubmit a dispute with updated materials.
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How Do I Know If Im Dealing With A Credit Repair Scam
Heres how to know if youre dealing with a scammy credit repair scam company:
- Scammers insist you pay them before they help you.
- Scammers tell you not to contact the credit bureaus directly.
- Scammers tell you to dispute information in your credit report you know is accurate.
- Scammers tell you to lie on your applications for credit or a loan.
- Scammers dont explain your legal rights when they tell you what they can do for you.
These are not just bad ideas, theyre also scams and theyll hurt your credit if you buy into the scam. If a company promises to create a new credit identity or hide your bad credit history or bankruptcy, thats also a scam. These companies often use stolen Social Security numbers, or they get people to apply for Employer Identifications Numbers from the IRS under false pretenses. They do that to create new credit reports. If you use a number other than your own to apply for credit, you wont get it. And you could face fines or prison.
Review Your Credit Report
Checking your credit score regularly and reviewing your credit report annually are two key things that can help you to rectify errors and make sure that everything is accurate in your report. For your convenience, the credit bureaus i.e. TransUnion, Equifax, and Experian give you a free copy of your report once a year where you can see your credit scores and view the information contained in the reports.
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How To Fix An Error On Your Credit Report
Checking your credit score regularly and reviewing your credit report annually are two key things that can help you maintain a strong score or make improvements. If you find that your credit score plunged, its important to take a close look at your credit report and determine what caused it. You may find that a delinquent account is dragging you down, you might find an error on your report, or you might discover some fraudulent activity. Even if your score remains steady, its a good idea to review your full credit report once a year and make sure everything looks accurate.
If you find a mistake or an error on your credit report you should take action to fix it quickly before anyone uses your flawed report and score to make a decision about you.
How To Dispute Credit Report Errors
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Errors on your credit reports can cause your credit scores to be lower than they should be, which can affect your chances of getting a loan or credit card and how much interest you pay. Disputing credit report errors and getting those negative items removed can be a quick route to a better score.
Here’s how to dispute credit report errors and have them removed in four steps.
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S To Rectify Errors In Your Credit Report
Errors in credit reports can be a common occurrence. It can range from incorrect personal information to wrong credit accounts. These errors can adversely affect your credit score which will further hamper your chances of getting a loan or credit card approval. This makes knowing how to rectify errors in your credit report important. You should rectify the errors at the earliest to avoid further problems. Lets look at some of the common errors in your credit report before starting with the steps to rectify errors in it.
Negative Information In A Credit Report
Negative information in a can include public records–tax liens, judgments, bankruptcies–that provide insight into your financial status and obligations. A credit reporting company generally can report most negative information for seven years.
Information about a lawsuit or a judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. Bankruptcies can be kept on your report for up to 10 years, and unpaid tax liens for 15 years.
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S In Disputing Credit Report Errors
Under the Fair Credit Reporting Act , both information providers and credit reporting agencies share similar responsibilities in correcting inaccurate information in your credit report. However, the stepping stone in disputing errors in your credit reports starts with you.
According to the FTC, you should take the following steps:
In a nutshell, you have to reach two key contacts to resolve this credit report error issue effectively. Correct the inaccurate information at the credit reporting agencies or credit bureaus and with your creditor or furnisher.
How You Can Check Your Credit Reports
You can get a free copy of your credit report from each major credit reporting agency every 12 months at AnnualCreditReport.com.
Get Free Weekly Credit Reports During the Coronavirus Crisis
Equifax, Experian, and TransUnion are offering free weekly online credit reports, so that you can manage your credit during the COVID-19 crisis.
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Impact Of Identity Theft On Your Credit Report
Identity theft occurs when someone steals your personal information and uses it to apply for new lines of credit. If these new accounts go into default, they will appear on your credit report and hurt your score.
Cleaning up your credit after identity theft can take anywhere from a day to several months or even years. The longer it takes you to realize someone stole your identity, the more difficult it will be to undo the damage. Monitoring your credit report will help you to stay on top of potential fraudulent charges.
How Will Accepted Disputes Affect Your Fico Score
Often your score will improve when errors on your credit report are corrected. In some situations, however, your score may not improve when credit information is corrected or updated. For example:
- It is often thought that closing credit card accounts will improve your score. This is not true. Closing an account will neither remove it from your credit report, nor will it prevent the payment history from continuing to be displayed and considered in the calculation of your FICO Score.
- Removing negative information from your credit report may not have the impact on your FICO Score that you expect. There could be additional negative information remaining that will prevent an immediate increase in your FICO Score.
- FICO Scores only consider credit-related information on your credit report. If you change personal information , the credit information on your report will not be impacted and your FICO Score will probably not change. The FICO Score only considers credit account, collection, and public record information.
It typically takes the credit bureau 30-45 days to respond to your dispute.
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Draft A Clear Comprehensive Dispute Letter
You can start with;this sample letter;from the FTC, but if possible, include even more information.
Clearly identify each item in your report that you dispute, explain why you dispute the information, cite any attached supporting documents and request that the item either be removed or corrected.
Disputes need to be specific, said Rod Griffin, director of public education for Experian. For example, its important to state the account is not mine, or the account payment was never late,; or the account is fraudulent.
Leonard Bennett, a consumer lawyer in Newport News, Virginia, who helps clients get credit errors fixed, recommended including a copy of your credit report, with every error highlighted and circled, along with copies of all supporting documentation
He also suggested having your letter notarized and providing a copy of your drivers license and a utility bill as proof of your identity.
Very often the bureaus will reject a dispute simply because they conclude that they need more identification, Bennett said.
Opening Another Credit Account
To improve credit availability and utilization ratio, an individual can consider opening another credit account. The only catch here is to ensure that however tempting it may seem, no balance whatsoever is carried on this new account. The cards credit limit immediately increases on available credit. Having a sizeable credit margin and less utilization of the available credit impacts a borrowers credit score positively. The best way to achieve this is to apply for a card with a bank with a pre-existing account. Another trick is to look for a credit card that does not charge an annual fee. This is because it is likely that the card will remain dormant over time. However, it is worth noting that cards with no annual fee tend to charge a higher interest rate on balances.
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Types Of Errors In Your Credit Report
The errors on credit report can be of various types. However, here are some types of common errors in your credit report that you need to watch out for:
However, this is important to note that any kind of information update will take at least two months. So, an account which is not older than 2 months might not reflect in your report. Also, an account might reflect incorrect balances because it has not been updated yet.
Check Your Credit Report For Fraud
Look for accounts that don’t belong to you on your credit report. Accounts that you don’t recognize could mean that someone has applied for a credit card, line of credit, mortgage or other loan under your name. It could also just be an administrative error. Make sure it’s not fraud or identity theft by taking the steps to have it corrected.
If you find an error on your credit report, contact lenders and any other organizations that could be affected. Tell them about the potential fraud.
If it’s fraud, you should:
- report it to the Canadian Anti-fraud Centre
The Canadian Anti-Fraud Centre is the central agency in Canada that collects information and criminal intelligence on fraud and identity theft.
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How To Fix Reconciliation Discrepancies
What if your account had been previously reconciled and now the amounts are different? Tw0 things may have occurred: 1 old transactions were changed, added or deleted or; 2 adjustments to the reconciliation were made i.e. journal entries etc.
Three reports in QuickBooks® will help you to identify where the discrepancies occurred. They are: the reconciliation discrepancy report, missing checks report and the transaction detail report.
Once you identify the discrepancy, if unsure how to make the correction, always consult the advice and/or the assistance of an accounting professional for help.
In the case of a forced reconciliation where the old adjustment is causing the discrepancy youll need to the reconciliation discrepancy account to find the error. Go to Lists > Chart of Accounts > Reconciliations Discrepancy account > choose appropriate date filter/range. Either youll see the discrepancy in the register or youll have to undo the old reconciliation adjustment until the opening balance is correct.
As with the modifications of old transactions reconciliation adjustment corrections can be complicated. The information provided here should be considered general information only and you should always consult the advice and council of your CPA. As well, feel free to contact our team of Bellingham based accounting professionals at 733-5530 with any payroll and/or accounting questions.
Request Your Free Medical History Report
You have the right to get one free copy of your medical history report, also known as your MIB consumer file, each year. You can request a copy for:
- Someone else, as a legal guardian
- Someone else, as an agent under power of attorney
You can request a medical history report online from MIB or by phone at 1-866-692-6901.
Not everyone has a medical history report. Even if you currently have an insurance plan, you won’t have a report if:
- You haven’t applied for insurance within the last seven years
- Your insurance policy is through a group or employer policy
- The insurance company isnt a member of MIB
- You didnt give an insurer permission to submit your medical reports to MIB
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Place A Credit Freeze
Contact each credit reporting agency to place a freeze on your credit report. Each agency accepts freeze requests online, by phone, or by postal mail.;
PO Box 26Pittsburgh, PA 15230-0026
Your credit freeze will go into effect the next business day if you place it online or by phone. If you place the freeze by postal mail, it will be in effect three business days after the credit agency receives your request. A credit freeze does not expire. Unless you lift the credit freeze, it stays in effect.
Work With A Credit Counseling Agency
Several non-profit credit counseling organizations, like the National Foundation for Credit Counseling , can help dispute inaccurate information on your credit report. The NFCC can provide debt counseling services, help review your credit reports, work with lenders, and help create a debt management plan free of charge.
As always, be wary of predatory credit organizations or companies. Make sure to find a reputable counseling agency and keep a lookout for any red flags, like hidden fees or lack of transparency.
When looking for a credit counselor, the Federal Trade Commission advises consumers to check out each potential agency with:
- The Attorney General of your state
- Local consumer protection agencies
- The United States Trustee program
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Is The Credit Reference Agency To Blame If There Is An Error
The three credit reference agencies, Experian, Callcredit and Equifax provide lenders with your credit report if you apply for a product with them.
This gives them plenty of power of your ability to get a mobile phone contract, credit card, mortgage and much more.
As a result, having an error free credit report is absolutely important, as any mistakes could damage your credit score.