How to Dispute Credit Report Errors and Protect Your Financial Opportunities
Credit report errors can impact everything from loan interest rates to job opportunities. Financial experts recommend checking your credit report annually and taking immediate action if inaccuracies appear to ensure your financial history remains accurate.
Taking advantage of financial opportunities requires a strong work ethic, some bravery to take a leap, and a commitment to staying on top of the details. While you can’t control which opportunities might come your way, you can make sure that your personal financial history is accurate and ready for scrutiny.
Checking your credit report annually is an important first step, but what if you find an error? Disputing credit report errors is a simple (if annoying!) process, so don’t shy away from taking immediate action.
The Importance of Your Credit Report
Credit reports are key pieces of your financial history and are one of the primary ways that outside agencies and individuals might judge your willingness to do business with you. Knowing that your credit report is accurate is essential for accessing financial opportunities.
Your Cost to Borrow Money
Lenders choose the terms of the debt they furnish. They can choose one rate for person A and an entirely different set of terms for person B. Your credit report and credit history are primary sources of information that lenders use to determine these terms. If your credit report shows problems with repayment or delinquent accounts, you may be charged a much higher interest rate for new loans.
Jobs, Personal Opportunities, and Homes
Your credit report also impacts your personal life. Many employers require a credit history from job applicants to assess responsibility and fitness for the job. Finding your dream home might be thwarted by poor credit history, especially in a competitive market.
What’s in Your Credit Report?
Your credit score is the overall number that shows how “risky” you are as a borrower. Many people know their credit score but are unsure what factors go into it. Your credit report lists these elements and allows you to look in depth at your financial history.
These are the key components of your credit report:
- A list of all open credit cards with the date of opening, credit limit, and current balance
- A list of all other loans, including mortgages, car loans, and personal loans from banks
- Information about payment status on all outstanding debts, including last payment dates and a list of any late payments or delinquent accounts
- Bankruptcy filings within the last 10 years
Checking Your Credit Report
It’s essential to check your own credit report regularly to look for inaccuracies. Since others rely on this document to make decisions about your financial opportunities, you must ensure its accuracy.
The federal government requires each of the three major reporting bureaus to provide a free copy of your report once every 12 months. Head to AnnualCreditReport.com to request your copies, then make a note in your calendar to do the same next year.
How to Spot a Problem
The Consumer Financial Protection Bureau provides a detailed description of the types of errors you should look for on your credit report every year:
- Identity errors: items like an incorrect name, address, phone number, or accounts belonging to another person with a similar name
- Account status errors: incorrect labeling of accounts as open/closed, incorrect labeling for authorized user versus owner, incorrect payment dates, errors in delinquency status, debts listed twice, and debts that are not yours.
- Data management errors: incorrect account balances, incorrect credit limits
Disputing Credit Report Errors
If you notice an error on your credit report, the companies and credit bureaus are required to fix the mistake for free (if they determine it was, in fact, an error). There are three steps you should take right away to fix the problems.
Collect Your Own Records
When you try to fix an error on your credit report, having your own records and documents to support the correction can make the process go more smoothly. Find credit card statements, loan documents, and identity paperwork that you might need to provide during the dispute resolution process.
Report the Error to the Credit Reporting Company
It’s essential to report any error you find directly to the credit reporting company that issued the report. Each company has clear instructions for reporting any errors. Document that you have reported an error through a paper trail in your email or with a confirmation number from a live agent over the phone. Get the names of the people you speak with and keep this information in an easily accessible location for future reference.
Contact the Company that Issued the Debt
Along with reporting the error to the credit reporting company, you’ll want to contact the lender who issued the debt. In many cases, individual companies must make corrections in their systems for accurate information to populate a credit report. As with the reporting agencies, it’s essential to document every step of your filed dispute.
What Happens After You File a Dispute?
After you’ve reported credit report inaccuracies to the credit reporting bureaus and the companies that furnished the debt, you should expect several next steps:
- Each agency has 30 days to investigate the claim.
- They should respond in writing, either by closing the case or by explaining the corrections they’ll make.
- You can follow up if you believe the case was closed in error; usually, this means you’ll need to provide additional documentation to support your claim.
- Companies that were at fault must contact all credit reporting bureaus and notify them of the error.
- Credit reporting bureaus that were at fault must provide you a free report with updated information and must also provide an updated report to agencies/employers who pulled your credit history within the last six months/two years, respectively. You must ask them to send these corrected reports.
Whether you’ve always had stellar credit or you’re working towards credit restoration, disputing errors on your credit report in a timely manner will make it easier to continue reaching your financial goals.
