A credit report is a summary of your credit history. A credit reporting company uses this information to determine your creditworthiness. Any incorrect information, and report errors can negatively impact your chances of getting approved for credit.
What Are Common Mistakes That Cause Credit Report Errors?
According to the US Federal Trade Commission (FTC), one out of five American consumers experience errors in their credit reports. We have compiled a short guide on how to read your credit report, and spot the common errors. Common errors include:
E.g incorrect personal information, or the mixing up of two accounts as a result of something like a shared surname.
Eg. Accounts reported as closed, when they are open or vice versa. An authorized user getting reported as the owner of the account. Accounts that are reported as late, but you have made payments on time. Incorrect dates: payments, opening, and first delinquency.
Eg. Your account reflects the incorrect current balance, or incorrect credit limit.
Eg. The same debt is listed more than once. It can be listed under a different creditor, or name.
Fraudulent Accounts, Or Transactions
Eg. Unknown accounts, and/or transactions in your name.
Fixing Credit Report Errors
Firstly, you have to notify the credit bureau, or bureaus either online or via the phone. The contact information should be visible on your report. Explain what the mistake is, and why you believe that it is an error. You must have evidence, and information to support your claim. Keep useful documentation handy to support your dispute.
Under the Fair Credit Reporting Act (FCRA), both information/data providers (referred to as Furnishers), and credit reporting agencies share similar responsibilities in correcting inaccurate information in your credit report. The bureau usually takes between 30 to 45 days to investigate the query.
How Will Accepted Disputes Affect Your FICO Credit Score?
Often, your score will improve after corrections. This is, however, not always the case. For example, many people believe that closing a credit card will improve their score but this is FALSE. The payment history, and credit card account will remain on your report, and be considered when calculating the FICO score.
If there is remaining negative information on your report after the removal of other negative information, then your score may not increase as much as you expect. The FICO Score only considers credit account, collection, and public record information.
There may be small differences among your reports, because some creditors don’t report your account activity to all three bureaus. Make sure to compare them in case there are discrepancies.
If the dispute is accepted, you will receive a new copy of your account. It is important to regularly check your credit report. Small errors that seem inconsequential to you, may actually affect your credit adversely.