Error on your credit report? Here’s how you dispute it
Whether you’re applying for a mortgage loan or financial aid for your child’s education, your credit history is a vital piece of information to lenders. Thus, an accurate credit report is essential to getting the best financial assistance.
A Consumer Finance Protection Bureau (CFPB) February 2017 Monthly Complaint Report detailed that since July 2011, 17% of the total complaints they have received have been about credit reporting, with 76% of those complaints dealing with incorrect information on a credit report. Around 5% of people have errors on their credit reports, so this is a real cause for concern.
Minimal mistakes on a credit report don’t necessarily equal minimal damage. The reality is, one false claim or forgotten change in status can mean the difference between being approved and being denied financial help.
Credit score vs. credit report
A credit report is a detailed history of all credit information. This includes current balances on all accounts, such as mortgages and auto loans, delinquent payments, possible bankruptcies and past credit inquiries.
A credit score is a three-digit number (ranging from 300 to 850) that indicates how likely it is for a person to repay debt. The score is reached by using the data from the credit report in a mathematical formula. It’s the primary method creditors use to determine your creditworthiness – so the higher a credit score, the better.
Any inaccuracies on a credit report have a severe effect on a credit score, loan eligibility, the ability to open new lines of credit and how much interest a person pays.
Common Credit Report Errors
Here are five of the more frequent errors that show up on a credit report.
- Incorrect information: Be sure your name is spelled correctly with your correct middle initial. This simple mistake could lead to information on your report belonging to another person with a similar name. Double check your home address, employment information, and Social Security number for accuracy.
- Accounts closed by issuer: Some credit issuers will close accounts based on inactivity. This is common with lines of credit specific to department stores. If this occurs, be sure the term “closed by grantor” isn’t listed on your credit report. This designation means you didn’t meet the company’s requirements, and it will affect your status in the eyes of lenders.
- Duplicate accounts: If you fall behind on payments, a credit card company may sell your debt to a collection agency. This agency will list the debt on the credit report, and the credit card company might fail to remove the debt.
- Unpaid debt more than 7 years old: After seven years, credit reporting companies are required to remove unpaid debt from your credit report. If you filed for bankruptcy more than seven years ago, all discharged debts should be off your statement. The bankruptcy will still be listed.
- Debts from ex-spouse: If you’re divorced, make sure you no longer share any unwanted accounts with your former spouse. This will ensure you won’t be liable for future debts. Scan your credit report to make sure no new obligations from your former spouse are added to your record.
How to get an error removed from your credit report
The Federal Trade Commission (FTC) provides detailed steps to correct errors on your credit report. By law, the companies or individuals providing information about you to credit reporting entities are responsible for correcting inaccurate or incomplete information.
If you’ve uncovered incorrect information on your credit report, the FTC suggests the following steps:
1. Send a certified letter to the credit reporting company
“Tell the credit reporting company, in writing, what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify the disputed item in your credit report, state the facts and explain why you dispute the information and request that it be removed or corrected.”
The FTC also suggests enclosing a copy of the report with the incorrect items circled. Send the correspondence by certified mail and mark the letter “return receipt requested” to document delivery to the credit reporting company received.
The FTC provides a downloadable sample dispute letter and suggests one letter per error if you find multiple mistakes. Retain copies of your dispute letter and enclosures.
2. Send a certified letter to the information provider
Repeat Step 1. but send the certified letter to the company providing the information to the credit reporting agency.
Include copies of the documents stating your claim. The FTC once again provides a sample letter to make the ordeal slightly easier.
According to the FTC, if the company continues to report the disputed item, it must notify the credit reporting agency that the account is under dispute. If the company finds your information to be correct, they’re legally obligated to correct the error with the credit reporting companies.
How often should you check your credit report?
Everyone is entitled to one free credit report each year. This detailed credit report includes information from all three credit reporting agencies – Equifax, Experian, and TransUnion. Check your credit score for free here.