Typical Errors on Credit Reports
One in five Americans have errors on their credit report, the Federal Trade Commission says. As identity theft continues to rise and major data breaches are commonplace, it’s more important than ever to keep a close eye on your credit.
Usually these errors are discovered when you are denied for credit, which unfortunately can be too late. If you’re looking to apply for a credit card, home loan or other credit product, you should take a proactive approach to fix errors on your credit report before you submit your credit application.
Request Your Free Credit Report to Check for Errors
Fortunately, through the Free Credit Report Act (FCRA), you are entitled to one free credit report every 12 months from each of the major credit reporting companies - Equifax, Experian, and TransUnion. You can access all of your reports in one place at AnnualCreditReport.com.
At University Credit Union, we recommend that you request your credit report several months prior to applying for any new credit, and check your credit reports for errors on a yearly basis, to catch any discrepancies before your report is needed. If you aren’t applying for new credit, you may want to stagger your free credit reports from each of the credit bureaus to key an eye on your credit profile throughout the year.
Three Common Credit Reports Errors
A few of the more common credit report errors can be sorted into three categories:
- Identity Errors or Incorrect Information
The first category of credit report errors is related to your identity. Review your credit report carefully, and check to make sure these items aren’t listed incorrectly:
- Ensure your name is spelled correctly and isn’t a similarly named relative or from another person with the same name. For example, if you are “John Smith Jr.”, make sure you’re not being listed as “John Smith.” Some people find their parent’s credit activity listed instead of their own, or inherit credit history from people with the same names. In addition, check for the wrong address, phone number, or Social Security number.
- Incorrect information reflecting an identity theft (one that you may or may not have known about). This can come in the form of accounts you didn’t open, or that aren’t familiar to you that are listed under your real name.
- Account Status
The second category of errors on credit reports pertains to the status of your credit accounts. Here’s what to look for:
- Closed accounts reporting as open, or closed accounts stating “closed by grantor” when you were the one to initiate the close request. (“Closed by grantor” has negative connotations on a credit report.)
- You are listed as an owner of account when you really are just an authorized user.
- The same account listed more than once, possibly with different last names or if creditor has changed, which is common in cases of collections.
- Higher balances than you have, or an incorrect credit limit, which can impact your debt to credit ratio, a calculation used in determining your credit score.
- Missing accounts that could show GOOD credit.
- Timing Issues
The third category is related to timing issues with your credit history. It’s smart to check for the following on your credit report:
- After 7 years, bad debt is supposed to be removed from your report. In cases of bankruptcy however, it stay on your report for up to 10 years.
- Reinsertion of incorrect information after you had it removed as a mistake.
How to Dispute Credit Report Errors
If you find any errors on your credit report, your first step is to reach out in writing to the creditor that reported the incorrect information. The FTC has a sample template letter. The creditor will have 30 days to investigate and determine whether it is an oversight on their part.
If they find a problem, it is their responsibility to reach out to the three credit bureaus to fix it. However, University Credit Union recommends that you send a similar letter at the same time to the main three credit bureaus on your behalf. They have 30 days to open a claim. Consumerfinance.gov has a set of instructions on how to reach out to Equifax, Experian, and TransUnion directly to get the best results.
While checking credit reports and disputing errors on credit reports can be tedious, and sometimes overwhelming, it’s an important part of keeping a healthy financial life. If you are thinking about applying for a loan or credit card and have any concerns about this process, contact one of our branch advisors.
University Credit Union is always happy to help.