Credit 101: Addressing Credit Report Errors

Published by Sphynx Financial on

What to do when you find a mistake

Now that you’ve reviewed your report, let’s address any credit report errors. Pull out your notes from the prior section and use them as a reference.

Why do Credit Report Errors Matter?

Personal Information

The items in this area will not affect your credit score, but it’s still important to correct them. Names or addresses you don’t recognize could indicate fraud or a misplaced account from someone who has a similar name. If you see this, pay close attention to the account history section.

If your credit report lists an old or incorrect name, it could inconvenience you when applying for a mortgage. The underwriter will likely request additional documentation like a tax return or driver’s license to verify your identity before approving the loan.

In addition, if there are old or incorrect addresses listed, try to have those removed, or may have to provide an explanation letter stating that you do not have an ownership interest in the property.

Finally, removing erroneous identifying information may also make it easier to dispute incorrect or fraudulent account history.

Account Information and Payment History

As we discussed in Intro to Credit Score, amounts owed and payment history make up 65% of your FICO score calculation! Thus, addressing any errors in this section is imperative if you are looking to improve your credit score.

On the lending side, mortgage underwriters will review your balances and payments to make sure you can qualify for your proposed monthly mortgage payment. They will also review your payment history to see if you are a credit-worthy borrower.

It’s important to note that balance and payment information is not updated in real time. For example, if you’ve paid off an account, the report may still list a balance and payment for 30-60 days.

If you see an account you don’t recognize, try to verify it before you discount it as fraudulent. Creditors will sometimes report the name of the bank, rather than their own name. Use the account number, payment amount and credit limit as a guide.

Credit Inquiries

Credit inquiries have a limited impact on your credit score under both the FICO and Vantage Score models, but they can point to potential fraud.

Like with the account information, verify any inquiries before reporting them as fraud using the dates as a guide. Oftentimes, auto dealers will run more than one inquiry in a short timespan to compare interest rates. These inquiries are lumped together so they will have a minimal impact on your score.

 
When applying for a mortgage, the underwriter will likely ask you for a letter of explanation to confirm that any recent inquiries did not result in a new account that’s not showing up on the report.
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    How Do You Fix Credit Report Errors?

    Step One


    First, address any recent inquiries you don’t recognize. Call the phone number listed on the report next to the inquiry and ask for verification of when and why the inquiry was made.

    If you discover that someone else applied for credit under your name, ask the creditor to cancel the application immediately, then contact one of the credit bureaus to put a fraud alert on your account (they will notify the other two). You can use this guide from the Federal Trade Commission to walk you through the step-by-step procedure you need to complete.

    Step Two


    Next, verify the source of any incorrect personal information by checking the name and address on your most recent credit card and bank statements.
    If you are able to find the error, call the number on your statement or credit / debit card and ask the representative to update your on-file information.

    If you aren’t able to find the source of the error, or if the creditor gives you a hard time, call the credit bureaus directly. They should be able to confirm which account is reporting the incorrect information and may be able to update the information over the phone.

    Step Three
    Last, address any account history or payment data errors. Gather as much documentation as you can to support your claim, then contact the creditor and ask them to update the information. If they agree, ask them to send you letter verifying that the data has been updated and your report has been corrected.
     
    Again, if the creditor will not assist you, your next step is to contact the credit bureaus and file a dispute. You can do this on their websites (listed below).

    How Do You Protect Your Credit?

    Whether or not you have any credit report errors, the best thing you can do is proactively protect your credit. Regularly monitor your credit report and account statements and consider freezing your credit to prevent anyone from opening a new account in your name.

    Any time you need to open new account you will need to lift the freeze. Depending on where you live it may cost $5-$10 each time, but knowing that you cannot fall victim to credit identity theft is priceless.

    Next Up

    Our last post in this series will look at how to handle credit mishaps.

    Appendix

    Credit Bureau Contact Information:

    Experian-1-888-397-3742
    www.experian.com 

    TransUnion-1-800-916-8800
    www.transunion.com

    Equifax-1-800-685-1111
    www.equifax.com

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