You may have heard horror stories about people whose credit has been permanently ruined by egregious errors on their credit report.
But you may not realize that even a small, seemingly innocuous error such as a payment incorrectly reported as late or missing can make a big difference in your ability to get the best possible rates on financial products like home and car loans.
A Federal Trade Commission study of the U.S. credit-reporting industry between 2004 and 2012 found that 5% of consumers had errors on at least one of their three major credit reports that could result in them paying more for auto loans, insurance and other products. A more-recent investigation by Consumer Reports, conducted between February and April, found that more than a third of the nearly 6,000 consumers who voluntarily checked their credit reports found mistakes.
While addressing an error on your credit report can be daunting, it is important to try to fix a mistake as soon as possible to prevent the consequences of a blemish on your credit record.
With this in mind, we answer some commonly asked questions about finding and fixing errors on your credit report.
How does this happen?
Mistakes can happen for any number of reasons, but often it’s a case of a creditor sending incorrect information to one or more of the credit bureaus—
Mistakes can also happen when debt is sold as part of the collections process. Sometimes a mistake is something relatively minor, like a wrong address or phone number, but it can also be something more concerning, like an account incorrectly reported as late or delinquent, or a balance error. There are even cases where files get mixed up with another person’s based on similar names and Social Security numbers.
Mistakes on your credit report can hurt your credit score, making it more difficult and expensive to purchase big-ticket items like a home or car. It can also make other loans and insurance more expensive, or make it difficult to rent an apartment, according to
Chi Chi Wu,
a staff attorney at the National Consumer Law Center who focuses on consumer credit issues.
How do I find out if there’s an error?
Federal law allows consumers to get a free copy of credit reports every 12 months from each of the three credit-reporting companies. Because of the pandemic, consumers can get free weekly online reports until April 20, 2022. Go to annualcreditreport.com/index.action to request a downloadable copy from each agency.
“The sooner you respond to an error, the better,” says
senior vice president of communications at the National Foundation for Credit Counseling. “The longer it sits on your credit report, the harder it can be to untangle, and the damage could be lasting.”
What if the negative information is accurate?
Consumers should seek to correct only inaccurate information on their credit report. They shouldn’t expect a missed or late payment to be wiped from their record if it’s accurate, even though it could ding their credit. People having broader credit issues might consider speaking to a credit counselor at the National Foundation for Credit Counseling or the Financial Counseling Association of America. These organizations provide free or low-cost credit-related counseling services to help consumers get on better financial footing.
Can I fix an error on my own?
Trying on your own to fix an error should be everyone’s first step, Mr. McClary says, since it’s free to do and there is information on how to do this on each of the three credit bureaus’ websites. “It’s much easier than it used to be,” he says.
You can dispute a credit report online on the bureaus’ respective websites or through postal mail, following the process outlined online. For those choosing the postal route, the Consumer Financial Protection Bureau has a sample dispute letter available at consumerfinance.gov/ask-cfpb. You’ll want to make sure you correct any errors with each agency, because correcting it with one might not fix the problem with the others, according to the National Consumer Law Center.
The credit bureau has 30 days to investigate your complaint (or 45 in some circumstances) and must give you the results in writing. If your dispute isn’t resolved, you can ask the bureau to include a statement of the dispute in your file and in future reports, according to the Federal Trade Commission, which provides consumer information about disputing errors at consumer.ftc.gov.
You can also ask the credit bureau to provide this statement to anyone who has recently received a copy of your credit report, likely for a fee, the FTC says. The FTC also provides a sample letter you can send to a business that supplied the incorrect information, available at consumer.ftc.gov. With this letter, include the credit bureau’s dispute form, if applicable, and copies of supporting documentation, and keep careful records of the process, the FTC says.
What documentation will I need?
This depends on what you are disputing. Generally, you’ll need to give your name, date of birth and Social Security number, as well as the reason for the dispute and documentation that supports your claim that an error was made. This could be a letter from a lender showing an account has been corrected, for instance, or proof that an unauthorized account was the result of identity theft. When submitting a dispute online, you’ll have an opportunity to attach supporting documents. For disputes via postal mail, check with each credit bureau to make sure you’re following its procedures and providing the required information.
What if I need professional help?
While you can often resolve issues on your own, some situations may warrant help from a paid professional such as a lawyer who focuses on credit-related issues. Ms. Wu recommends visiting the National Association of Consumer Advocates at consumeradvocates.org/find-an-attorney to search for attorneys by state.
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There are also credit-repair firms that, for a fee, help consumers with these issues, but you’ll want to be careful to choose a firm that doesn’t engage in illegal or shady practices. Under the federal Credit Repair Organizations Act, credit-repair companies can’t make untrue or misleading statements or demand payment in advance, and they must also provide a written contract that includes certain details about the job they’ll perform as well as the consumer’s right to cancel.
Some states also have specific regulations that apply to these businesses, so try to ensure the company is in good standing with the state. You can also check out the Consumer Financial Protection Bureau’s enforcement action database at consumerfinance.gov/enforcement/actions to see if a company you’re considering shows up.
Consumers should also avoid a provider that guarantees to increase the consumer’s credit score, promises to remove negative information, even though it’s accurate, or encourages consumers to make false claims, according to the website of the American Association of Consumer Credit Professionals, a trade organization that includes the country’s largest credit-repair companies.
Is Congress doing anything to make it easier for consumers to fix credit mistakes?
Complaints about credit reporting have been on the rise, and there are legislative efforts afoot to improve the accuracy of credit reports and the dispute system. Two bills passed in the House of Representatives in 2020, where new legislation was also introduced this year. Last year’s House bills weren’t taken up by the Senate. In June, the House Financial Services Committee held a hearing on overhauling the credit-reporting system.
Credit report: A summary of a consumer’s personal credit history, including detailed information about the consumer’s payment history for credit cards, mortgages, auto loans and other debt. A strong credit history can make it easier to borrow money and get more favorable terms, whereas a weak credit history can make borrowing more difficult and expensive.
FICO score: A three-digit number (from 300 to 850) based on the information in your credit reports that helps lenders determine your loan-repayment likelihood. The score is used in more than 90% of lending decisions, according to myfico.com.
Credit bureaus: Three national credit bureaus collect and update your credit-related information. Here’s how to reach them for disputes:
Equifax Information Services LLC
P.O. Box 740241
Atlanta, GA 30374
P.O. Box 4500
Allen, TX 75013
TransUnion Consumer Solutions
P.O. Box 2000
Chester, PA 19016-2000
Ms. Winokur Munk is a writer in West Orange, N.J. She can be reached at [email protected].
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