According to the Federal Trade Commission, around 20% of people have at least one inaccurate item on their credit reports. It’s actually easier than most people realize for errors to appear on credit reports. Address changes, similar family names and clerical errors are all common reasons for inaccuracies to occur. Fortunately, you can take steps to address any errors you find on your credit reports.
How Do Inaccuracies Happen on Credit Reports?
The data that’s gathered for credit reports comes from a variety of places. Some of it today is automated. That complexity leads to plenty of room for errors. Some common sources of credit report inaccuracies are summarized below.
- Address changes. You might move to a new home. Your new address will be connected to you in some data, but before you lived there, it was connected to other people. That simple fact can cause errors on credit reports and in other systems, as people get associated with information that was previously associated with someone else.
- Family name confusion. John Langley, Sr., and John Langley, Jr., might experience issues with their credit information being confused. This is true for anyone with similar names, especially within the same family, because it’s likely those people at some point shared other information, such as names of relatives and addresses.
- Name changes. Getting married and changing your name—or changing it for other reasons—could also lead to some potential reporting confusion.
- Clerical errors. Someone might simply type the wrong number or hit the wrong button when creating data or reporting information to a credit bureau. That can mean the difference between an on-time payment and a late payment or whether or not something shows up under the right person.
One of the steps consumers can take to mitigate name-related issues is to use the same version of their name and address on all documents. If your name is John Paul Smith and you always use your full name, don’t switch to John P. Smith or John Smith later.
Why Do These Errors Matter?
The reason consumers should care about errors on credit reports is that they can potentially lower credit scores. Inaccurate late payments, accounts that don’t belong to you and hard inquiries you never approved are all examples of items that might drag down your score.
A lower credit score can have many impacts on you. Some potential impacts include:
- Reduced ability to obtain credit
- Higher interest rates that drive up the cost of credit
- Difficulty getting some services, such as insurance or utilities
- Potential issues when applying for certain types of jobs
- Difficulty getting landlords to rent to you
What Kind of Errors Do Consumers Need to Look Out for?
You can work to find and correct errors on your credit reports to protect your score and financial future. Start the process by ordering your free credit reports. You can get a free credit report from each of the three major credit bureaus once per year at AnnualCreditReport.com. The three major bureaus are Experian, Equifax and Transunion.
Tip: Through April 2021, you can get a free credit report once a week at AnnualCreditReport.com. That’s due to provisions to help consumers manage finances better during the COVID-19 crisis.
Once you get your free credit report, review it for errors. Some of the things you might want to look for include:
- Inaccurate identifying information, such as your name and address
- Accounts that don’t belong to you
- Duplicate accounts that are showing up twice and potentially impacting your credit more than they should
- Accounts that are incorrectly labeled as late or delinquent
- Inaccurate dates, such as how old your account is or when you closed it
- Errors regarding how much total you owe or what your credit limit on an account is
- Accounts that aren’t showing up as you might expect
How to Fix Credit Report Errors
Under the Fair Credit Reporting Act, you have a right to a credit report that is free of errors. You also have a right to dispute any information you think might be incorrect.
You can do so by contacting the relevant credit bureaus and notifying them that you believe an item is inaccurate. This is done via a credit dispute letter. The FTC provides a sample credit dispute letter here.
The letter should identify the inaccurate information and explain your reasons for deeming it so. You might also want to include a copy of your credit report with the information circled, as well as any documentation proving your claim.
The credit bureau typically has 30 days to investigate the matter. That includes contacting the original creditor or other entity that supplied the information. If the original entity that supplied the information can’t prove it’s accurate, the credit bureau has to correct it or delete it.
Because an error can pop up on credit reports at any time, it’s critical that consumers keep track of their credit reports. Take advantage of tools that let you monitor your credit. At minimum, order your credit report once every year and go through it to determine that everything is accurate.