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Stephen Lesavich, PhD, JD @SLesavich
What is a credit report and why should I care if there are errors on it?
Errors on your credit reports can lower your credit scores. With low credit scores, you typically pay a higher interest rate if you borrow money or may not be able to borrow money at all.
A credit report is a record of your credit activities created by a consumer/credit reporting agency (CRA). Your credit report lists all accounts for which money has been lent to you and credit extended to you.
The credit reporting bureaus routinely collect and record information from lenders who have loaned you money, credit card issuers, and other financial institutions who have extended credit to you.
A large number of credit reports include errors. The credit reporting bureaus obtain and record huge amounts of information on a daily basis. It is common for mistakes to be made by the credit reporting bureaus. It is also common for the entities reporting information to the credit reporting bureaus to make mistakes.
A Federal Trade Commission (FTC) study in 2013 of the U.S. credit reporting industry found that five percent of consumers had errors on one of their three major credit reports.
Overall, a congressionally mandated study on credit report accuracy found that 1 in 5 consumers had an error on at least one of their 3 credit reports.
How often do errors occur? More often than you might think. While credit reporting companies claim that most of their reports do not have errors, a study by the Federation of State Public Interest Research Groups (PIRG) in 2004 found that nearly 79% of all credit reports contained at least one type of error.
The Columbus Dispatch conducted a year-long investigation (published in 2012) into credit report errors and examined nearly 30,000 customer complaints with the FTC, finding an error rate of about 30%. The complaints were over errors ranging from incorrect personal information to completely inaccurate debt information. Some credit reports even had the consumers listed as deceased when they were very much alive!
Both creditors and the credit reporting bureaus are responsible for accepting and reporting a huge amount of data. As much as they try to be accurate, mistakes happen. It is up to you to catch and correct those mistakes on your own credit report, and even then, you must be persistent.
In more than half of the complaints investigated by the Columbus Dispatch, consumers reported that the major credit reporting companies could not be convinced to correct the errors on their credit reports.
The Washington Post reported in 2016 that the Consumer Financial Protection Bureau (CFPB) was investigating errors in credit reports as well as the struggles that a large number of people had getting errors on their credit reports corrected.
In the United States, the Fair Credit Reporting Act (FCRA) gives you the right to contact the credit reporting bureaus and have errors removed from your credit report.
The FCRA prohibits the credit reporting bureaus from reporting inaccurate, incomplete, or unverifiable information.
In 2003, the FCRA was revised by the Fair and Accurate Credit Transactions (FACT) Act to allow consumers to obtain a free copy of their credit report from each of the three major credit reporting bureaus once per year.
Credit reports obtained from each of the three major credit reporting bureaus include similar categories of information, but each bureau presents the information in different formats. The order in which the information is listed also varies, as do the section headings and the layout of the reports. The information contained in each version of your credit report may also differ because not all creditors report information to all three of the major credit reporting bureaus.
You need to be aware that under US Federal Law, you can request a free copy of your credit report from each of the three major credit reporting bureaus once per year.
Information on obtaining your free credit reports is available from the Federal Trade Commission (FTC) online.
Your free annual credit reports are available online or by calling (877) 322-8228. You can also request your free credit reports by downloading the “Annual Credit Report Request Form” from the FTC website and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
Since you are entitled to one free credit report from each credit reporting bureau, consider ordering one of your credit reports from one of the credit reporting bureaus in each four-month period during a calendar year. This way, you can monitor your credit for free throughout the whole year.
Unfortunately, the credit reporting bureaus are not required to provide you with a free credit score when you request a free credit report. In fact, the free credit reports do not include your current credit scores at all. Your credit scores have to be obtained from other sources.
Each credit reporting bureau may report different information, and may include different errors, so take advantage of your legal right and request your credit report from all three credit reporting bureaus.
Review the information on each of your credit reports and take action to correct any errors you find. If you find any errors in your credit report, you can dispute the errors electronically directly from your free credit report. The three credit reporting bureaus each provide you with a method to initiate a dispute directly from the display of your free credit report. You can also dispute any errors you find in writing.
The FTC publishes a document entitled “Disputing Errors on Credit Reports.”
This FTC document lists the necessary steps you must take, and includes sample letters to send to the credit reporting bureaus and other creditors.
In general, at least two steps are required for every incorrect entry you find on your credit report.
First, you must write to both the credit reporting bureau that reported the error, and the appropriate creditor. Second in these letters, you must indicate which entry you want to dispute as inaccurate, and explain in detail, including any documentation you have, why you think the entry is inaccurate.
If your credit report includes any negative information that is indeed accurate, only the passage of time will remove the entry from your credit report.
The amount of time varies (depending on the type of information) from two years (for normal credit inquiries by creditors) to seven years (for negative information such as missed or late payments, etc.) to ten years (for certain types of bankruptcy and other negative information).
If you request your credit report and see errors on it, first try to get the errors resolved with the credit reporting company by going through their complaint process. If that fails, contact the CFPB either by going online, or by calling toll-free (855) 411-2372. You can also fax complaints to (855) 237-2392, or mail them to Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa, 52244.
There are also a large number of companies that target consumers who have poor credit histories with promises to clean up their credit reports.
Remember, there is no company or individual that can remove negative, but accurate, information from your credit reports.
If you pay any credit repair agency any fees at all to repair your credit, the end result will be that you will have exactly the same credit score as you did before you started, you will have exactly the same accurate negative information on your credit reports, and you will have wasted any money you paid to the credit repair company.
Many credit repair companies will do nothing more than to assist you with the identification of inaccurate information and errors on your credit reports, and then charge you to complete the documentation to dispute the errors. This is something you can do yourself for, FREE. So think about this before you pay any money for such services.
Stephen Lesavich, PhD — Co-author of the award-winning and best-selling book: The Plastic Effect: How Urban Legends Influence the Use and Misuse of Credit Cards.
Regular columnist: Positive Impact Magazine
Copyright © 2017, by Stephen Lesavich, PhD. All rights reserved.
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