The Big Three credit reporting agencies – Experian, TransUnion and Equifax – must accurately gather data from billions of transactions and use that information to track and reliably report the credit histories of more than 200 million Americans.
They’re good at what they do, but good is not error-free. It turns out the Big Three and “perfection” don’t even live in the same ZIP code.
The Big Three — Equifax, TransUnion, Experian — make mistakes. Lots of mistakes; 40 million of them, according to a Federal Trade Commission (FTC) study. The FTC study showed one in five credit reports contained “material” errors — errors that could ding your credit score, making borrowing more expensive or even impossible.
And that’s just the tip o’ the proverbial iceberg. Among other concerns, low credit scores hurt your chances of renting an apartment, getting the best deal on utilities, landing a job, or getting a promotion. Now, imagine your score has been brought down by any of several common credit report errors.
But you won’t know you’re one of the victims unless you order copies of your credit reports from the Big Three. We go into it in a bit more detail below, but long story short, you are entitled to one free annual credit report from each of the major credit-reporting companies. Take them all at once, or stagger your requests, but get them and examine what’s in them.
Because, when it comes to fixing credit report errors, you can’t count on the credit bureaus to initiate action, or give even more than grudging assistance. Instead, the burden to root out errors and see they’re corrected, falls almost exclusively on consumers.
The good news is, it can be done. You can do it.
Common Credit Report Errors to Look For
Certain credit report errors are common and should be spotted easily by a consumer. Here’s what to look for.
- Incorrect personal information/identity errors: Your name may be misspelled, or someone with a similar name may show up on your account. Your report may show other personal identification errors, such as an incorrect address, birthdate, or Social Security number.
- Incorrect accounts resulting from identity theft: According to the FTC’s Consumer Sentinel Network Data Book 2018, more than 167,000 people reported fraudulent credit cards opened using their information. Attacks on databases grow more aggressive and sophisticated every year, piercing systems containing millions of consumers’ information.
- Accounts that don’t belong to you: You needn’t be a victim of fraud to have someone else’s accounts show up on your report. As noted above, your report may get tangled with someone with a similar name, and it might be someone less scrupulous about making timely payments, or controlling their use of credit.
- Authorized user shown as account owner: An account you opened and own mistakenly shows your card-carrying son or daughter as the owner.
Some common inaccuracies, and their potential harm, are self-explanatory.
- Closed accounts shown as open
- Duplicate accounts (possibly with different names)
- Inaccurate payment history/account(s) incorrectly reported late or delinquent
- Incorrect date of last payment, date account opened, or date of first delinquency (if any)
- Outdated balance or credit-limit information
- Reinsertion of inaccurate information after it was disputed and corrected
The Effects of Inaccurate Credit Reports
Nothing good comes from inaccurate information showing up on your credit report, although some inaccuracies are less harmful than others. For instance, a misspelled name or wrong (possibly old) address won’t cost you points on your score.
On the other hand, accounts that are fraudulent or contain account errors — these would be the “material” inaccuracies mentioned earlier — can lead to a world of financial hurt. Bad information that drops your score can:
- Harm your ability to get credit — a credit card, a mortgage, a personal loan, a car loan or lease — or at least make the terms undeservedly less attractive.
- Make it tougher to get a job, or a promotion. Because employers want to know those they hire are trustworthy and financially sound, it’s standard practice, allowed under federal law, for them to pull a credit report to help choose among job candidates. The same often is the case when considering team members for a promotion.
- Limit apartment-seekers’ options. Landlords want to be certain they’re not writing a lease for a tenant who might have trouble making timely rent payments; processing an eviction is time-consuming and costly.
- Make it more costly to open an account with a utility company. Telephone, water, sewer, gas, electricity, internet, cable — necessities of modern life — are expensive enough without the burden of a low credit score. Too low and, flagging you as a risk, the provider could assess a deposit equal to as much as two months’ worth of usage.
- Drive up your car insurance premiums — and it’s not only absolutely legal, it’s rational. Separate studies, in 2003 at the McCombs School of Business at the University of Texas and in 2007 by the FTC, revealed a statistical correlation between how much a motorist costs an insurance company and that motorist’s credit score.
- Cost you your security clearance. If your career path hinges on being trusted with classified material — active duty military or any of several dozen jobs in federal and state government — you may be stymied by damaged credit, which, experience indicates, makes you more susceptible to being compromised. You don’t to lose a valuable, coveted professional credential over credit report errors.
How to Fix Credit Report Errors
What President Ronald Reagan said about dealing with the late, unlamented Soviet Union — “Trust but verify” — applies as well to the Big Three credit reporting agencies. You can’t be fretting about your credit report 24/7, but you can protect yourself by intermittently verifying the information is accurate and up-to-date.
You are entitled to a free report from each member of the trio every 12 months, so you can request all three at once, or stagger them so you’re seeing a fresh report every four months. Maybe you order Experian every January, Transunion every May, and Equifax every September.
When it arrives, review your credit report carefully, looking through its information for the errors listed above. Make note of those you find, gather your supporting evidence, and present it to both the credit reporting agency and the company that is the source of the misinformation (also known as the “information furnisher”). For example, you may find a hospital bill the agencies report as outstanding when, in fact, you already paid it off.
The Consumer Financial Protection Bureau offers sample credit report dispute letters and instructions for download on its website. The FTC also has a sample dispute letter.
You may present your dispute via mail or online at each of the Big Three’s websites.
Unless your dispute is deemed frivolous — you’re complaining about the entire report, for instance, or rehashing an old dispute with no fresh evidence — credit reporting agencies generally must investigate your claim within 30 days after submission (but you may hear nothing for up to 60 days).
The process includes providing information you submitted to the credit issuer responsible for the information in question. The issuer, in turn, must investigate and present a response to the credit reporting agency.
If the issuer was in error, it is required to alert each of the Big Three.
No matter the outcome, you will receive a written summary of the results of the investigation. If your report changes because of your claim, you will receive a new free copy.
Don’t like the result of your dispute? You have options.
- Redispute the error — only if you have solid evidence that shows the investigation reached the wrong conclusion. Explain in a letter what documents you’re sending, and what they mean.
- File a complaint with the FTC if you believe the credit reporting agency is providing inadequate assistance, or isn’t addressing your claim seriously, tell the FTC.
- Address the dispute with the creditor that issued the erroneous information; presenting your concrete evidence, ask the creditor to correct and update its records.
- File a statement of dispute (up to 100 words) with the credit reporting companies explaining your side of the complaint. It will show up when creditors pull your reports.
Finally, follow up. Keep requesting those free credit reports — all at once annually, or spaced out across the calendar — and, as you look for fresh errors, make certain the dispute that was resolved is accurately reflected in your latest report(s).
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