Everyone makes mistakes, and credit bureaus are no exception. In fact, a Federal Trade Commission study last year found that one in four consumer credit reports contain errors – these include everything from minor mistakes to outrageous oversights.
It’s important to know what to look for when you’re checking for mistakes in your credit reports. There are three types: identity errors, incorrect account details and fraudulent accounts.
1. Identity errors
The three major credit bureaus are Equifax, Experian and TransUnion. Each bureau maintains its own database of consumer data, including personal information, account information and payment history. This information is included in your credit reports.
From time to time, a credit bureau – or all three – will get some information wrong. Some of these errors are minor. For instance, one bureau might have your street address incorrect. It’s annoying, but it won’t hurt your credit. Other times, it’s a more serious error: Your name could become mixed up with someone else’s, and you could begin seeing some of his accounts on your credit report. This will affect your credit either positively or negatively, depending on his payment history.
2. Incorrect account details
Sometimes the bank or lender providing information about your accounts to the credit bureaus gets things wrong. On the other hand, the credit bureau could incorrectly process the information provided. For instance, your credit card could be displaying the wrong credit limit, your mortgage might have the incorrect origination date or your auto loan could show as “open” when it’s clearly been closed.
3. Fraudulent accounts
This is the most serious error out there, since it means someone has used your identity – including your name, Social Security number and other personal data – to open and begin using an account. If there’s a line of credit on your credit report that you didn’t open, you’ll want to move quickly to ensure that the fraudster can’t continue opening accounts in your name. You can do so by adding a security freeze on your credit reports.
A security freeze will prohibit you – or anyone posing as you – from opening any new lines of credit. Keep the freeze on your account until you’ve sorted out what’s going on and taken the appropriate steps to prevent fraud from happening to you again, including signing up for a credit monitoring service. You also might want to consider changing your Social Security number.
What to do if you spot an error
Once you’ve identified an error on your credit report, you’ll need to dispute it with the credit bureau or directly with the information provider.
Disputing with the credit bureau. This is the most conventional route and is best for disputes involving incorrect personal information on your credit report. Get a copy of your credit report(s) containing the error, gather supporting documentation for your case and write a letter to the appropriate credit bureau(s) describing your specific dispute. Make it clear and concise. After you’ve made a copy for your own files, send the letter to the credit bureau. The credit bureau is legally required to investigate your dispute and will typically do so within 30 days of receiving the notification.
Disputing with the information provider. If your bank or lender is reporting incorrect information to the credit bureaus, or if someone else opened an account in your name, start by contacting your bank or lender (the information provider) directly. Find an email address or phone number, and make notes of any conversations you have with a representative. Sometimes, talking to your lender directly can facilitate the dispute process.
The bottom line: Now that you know which common errors to look for, remember that you’re responsible for clearing up mistakes. You’re entitled to one free copy of your credit report from each of the three credit bureaus each year. Stay on top of things by checking your credit reports often to make sure they’re accurate.