If you’re trying to build or maintain a solid credit score, you’ve probably heard it time and time again: pay your bills on time, keep your debt low, and monitor your credit regularly. But what if something beyond your control is dragging down your score? What if it’s not even your fault? That’s where credit report errors come into play.
Credit report errors happen more often than you might think. And while these errors might seem small, they can have a huge impact on your credit score. These mistakes can lower your score and affect your ability to get approved for loans, credit cards, and even rental agreements. Let’s dive into why these errors occur, how they can hurt you, and, most importantly, how to fix them.
What is a Credit Report and Why Does It Matter?
Your credit report is essentially a detailed history of your financial behavior. It includes everything from your loan and credit card payments to how much debt you owe, how often you make late payments, and whether you’ve declared bankruptcy. Credit bureaus (the big three: Equifax, Experian, and TransUnion) gather this information from lenders and other financial institutions. Based on this data, they assign you a credit score, which is a three-digit number that reflects your creditworthiness.
The higher your score, the more likely you are to get approved for loans and credit. A good credit score (typically 700 or higher) can save you money by helping you secure lower interest rates, which can make a big difference in how much you pay over time.
Common Types of Credit Report Errors
1. Missed or Late Payments
One of the most common mistakes is when your credit report incorrectly shows that you missed a payment. Even if you paid on time, a late payment could be mistakenly reported, which could drop your score significantly. The impact can be particularly severe if it’s reported as 30, 60, or 90 days late, as it indicates to creditors that you might be a risky borrower.
2. Incorrect Account Information
Sometimes, credit reports can list accounts you don’t even own. This is known as mixed files, and it usually happens when your information is mixed up with someone else’s who has a similar name or Social Security number. This could include loans, credit cards, or even bankruptcies that aren’t yours.
3. Duplicate Accounts
Another issue occurs when the same account appears more than once on your report, causing it to look like you have more debt than you actually do. This can happen if a creditor reports your account multiple times by mistake.
4. Incorrect Personal Information
Errors like a misspelled name, wrong address, or incorrect date of birth might seem minor, but they can cause problems. Sometimes, these types of errors are linked to accounts that don’t belong to you, or worse, they can make it harder for creditors to verify your identity.
5. Old Debts Showing Up as Active
A debt that’s been settled or forgiven should no longer appear as an active account. However, in some cases, old accounts that have been paid off or charged off may still be listed as outstanding debts. This can cause your credit utilization ratio to look higher than it really is, which could hurt your score.
How Credit Report Errors Can Impact Your Score
Even a small error can have a significant impact on your credit score. Here’s how:
1. Lower Credit Score
The most obvious consequence is a lower credit score. If you have a late payment incorrectly reported, or if your report includes accounts that aren’t yours, your score will take a hit. A lower score means you’ll be seen as a higher risk borrower, which could lead to higher interest rates or even denial of credit.
2. Difficulty Getting Approved for Loans
A mistakenly reported missed payment or a discrepancy in your debt load could make it more difficult for you to get approved for loans, mortgages, or credit cards. Lenders rely on your credit report to gauge your ability to repay borrowed money. An error could make them think you’re a riskier borrower than you actually are.
3. Higher Interest Rates
A lower credit score isn’t just about being denied credit—it can also lead to higher interest rates. Lenders typically offer better rates to people with good credit, but if your credit report is showing errors, you could end up paying more in interest over the long run. This can add up quickly, especially with large loans like mortgages or car loans.
4. Negative Impact on Insurance Premiums
In some states, insurers use credit scores as a factor in determining your premiums. If your score is lower due to errors on your report, you might end up paying higher rates for car or home insurance. This is a huge expense that you could avoid if the errors were corrected in time.
Steps to Fix Credit Report Errors
Now that we know how damaging credit report errors can be, let’s take a look at how you can fix them.
1. Get Your Credit Reports
The first step in identifying and fixing errors is to check your credit reports. You can get a free copy of your credit report from each of the three major credit bureaus once every 12 months through AnnualCreditReport.com. It’s important to check all three because the information on each report can differ. You can also request a report if you’ve been denied credit in the past 60 days.
2. Identify and Dispute Errors
Once you have your credit report, go through it carefully. Look for any discrepancies or items that seem incorrect. If you find something wrong, you can file a dispute with the credit bureau that reported the error. All three bureaus allow you to file disputes online, by mail, or by phone.
To dispute an error, provide as much evidence as possible. For example, if a payment is incorrectly marked as late, show proof of payment. If an account is incorrectly listed under your name, provide documents showing that the account is not yours. Be sure to follow up to make sure the dispute is resolved.
3. Notify the Creditor
In addition to disputing with the credit bureaus, you should also notify the creditor that reported the error. This could be the bank, lender, or card issuer. They may be able to correct the mistake directly with the credit bureaus on their end.
4. Follow Up
Credit bureaus are required to investigate disputes within 30 days, but it’s still a good idea to follow up. Sometimes, the investigation can take longer, especially if the issue is complex. If the error isn’t corrected, you can escalate the dispute or reach out to a credit repair service for help.
5. Consider Using a Credit Repair Service
If you’re struggling to resolve errors on your credit report, a credit repair service might be able to help. These services typically charge a fee, but they can assist with filing disputes, negotiating with creditors, and removing incorrect information from your report. Just be sure to research any service you use to ensure it’s legitimate.
Preventing Future Credit Report Errors
After correcting errors on your credit report, the next step is to prevent them from happening again. Here’s how you can stay on top of your credit in the future:
1. Monitor Your Credit Regularly
Set up alerts or subscribe to a credit monitoring service to keep an eye on your credit report. This way, you’ll be alerted immediately if any new errors pop up. Some services are free, and others charge a fee, but they can be a valuable tool for staying on top of your credit.
2. Use Strong Identity Protection
Consider enrolling in identity theft protection. If someone tries to open accounts in your name, these services can alert you right away. By catching fraudulent accounts early, you can prevent them from affecting your credit score.
3. Keep Track of Your Accounts
Stay organized and keep track of your accounts. If you close an account, make sure the creditor reports it as closed to the credit bureaus. Similarly, if you move or change your name, notify all your creditors so your information stays accurate.
While credit report errors can be a major headache, fixing them is possible with the right approach. By monitoring your credit regularly, disputing mistakes promptly, and staying organized, you can protect your credit score and financial future.
So, the next time you check your credit report, be sure to look closely. Don’t let errors go unnoticed—your score depends on it.