Credit reports can be the key to unlock the door to good interest rates on loans and credit cards, but one error can slam that door shut.
“The cost of having an error on your credit report that is actually tanking your score can be substantial, as it leads to less favorable terms when borrowing,” said Leslie H. Tayne, a personal finance expert and attorney at Tayne Law Group. “If you are trying to buy a home for your family or a car to get back and forth to work, for example, loss of access to funding or paying thousands of dollars more in interest can be detrimental.”
Weeding out mistakes popping up in your credit report is an important step in building financial health. It’s estimated that 44 percent of credit reports have errors, according to a study by Consumer Reports.
But finding the errors is just the first step; reporting them and getting them resolved is where the hard work begins.
Step 1: Round up your reports
While “treasure” may seem like an exaggeration, credit report errors can be costly, as Tayne pointed out. So, finding them and resolving them has significant monetary value – it can save consumers thousands of dollars in interest payments for future loans and credit cards.
Getting a copy of a credit report is the most important move at this step. FreeCreditReport.com offers access to credit reports from the three main bureaus that produce them: Equifax, Experian and TransUnion. Each report lists all your open and closed credit accounts, which can include:
- Credit cards
- Personal loans
- Auto loans
- Mortgages
- Student loans
- Store credit card accounts
Each account should have an entry listing information such as the lender’s name, when the account was opened, the account balance and its payment history.
Check each one of these areas for mistakes. The costliest error in this step is inaccurate late payment information.
The account’s payment history shows you every payment you’ve made on the account. It also notes if the payment was on time or 30, 60, or 90 days late. Just one late payment can lower a score by anywhere from 60 to 110 points, according to credit-score repair firm The Credit People.
A consumer’s payment history is the most important factor in their credit score, which is why fixing payment errors can have such a big impact on a score. Once a late payment is reported to a credit bureau, the only way to take it off a credit report is if it’s inaccurate, according to Equifax.
Mistakes usually pop up for one of four reasons, said Atoine Sallis, CEO of credit-score platform Credit Genius:
- User error: A borrower provides incorrect information
- Lender error: The firm offering the credit incorrectly lists the account
- A collections agency provided erroneous information
- The company processing a credit application enters inaccuracies.
Mistakes in names and addresses typically don’t hurt credit scores, Sallis said.
Step 2: Mine the mistakes
Look through your credit report and verify every account listed on the report. Pay close attention to payment histories. Payments that are more than 30 days late can drop a score by more than a hundred points, but the opposite is true.
A score could shoot up by more than a hundred points if, for example, a 90-day late payment is removed.
Remember to look at a report from a wide perspective, too – don’t just focus on payments. Verify that all accounts listed are accounts you opened or were added as an authorized user or cosigner.
“Check it line by line for any inaccuracies,” Tayne said. “If something seems off or unfamiliar, do your research to confirm whether it’s legitimate. If it isn’t, file a dispute with the credit bureau and include any supporting documents you have to help resolve the issue as quickly as possible.”
To stay on top of any new errors, Tayne recommends checking credit reports every three months.
If your credit score drops significantly, even if you’ve made on-time payments, check your credit report for newly reported late payments that might be incorrect.
Step 3: Launch the dispute
Once an error is found, the next step is to file a dispute with the issuer of the credit report. Online reports usually have a “Dispute” button within the individual account in question, or in a user’s online account menu.
The process can vary depending on the site offering the report but, generally speaking, consumers will:
- Click or tap a “Dispute” button
- Choose the account with the error
- Identify the error as an account that doesn’t belong to you or inaccurate information.
- Note or explain what the error is
- Submit the dispute.
Mailing a dispute to a credit bureau can be done, but at a cost. Federal consumer advocate the Consumer Financial Protection Bureau provides instructions and a template letter to use. Pay for the dispute to be sent by certified mail – it requires the recipient to sign for delivery and proves the dispute was received.
Credit bureaus typically have 30 days to investigate the dispute and another five business days to tell you what they found, according to the bureau.
However, it could take longer if the bureau requests additional paperwork or information to investigate the dispute, Sallis said.
Checking in with a bureau a week or two after filing a dispute is also a smart idea, Tayne said.
“Be sure to track the dispute and follow up with the corresponding credit bureau if necessary,” she said.
This article is sponsored by Credit Karma. We may earn a commission if you engage with their services using links in this article.
Proposed Social Security cap would impact 1 million recipients
Trump official boasts that Americans’ credit card spending is ‘through the roof’
These three careers pay way more than you think they do
Average US long-term mortgage rates continue to rise
Oil prices continue to fall as optimism around Iran deal grows
Americans would trade most of their yearly income for peace of mind
