Common Questions About Credit Reports
How often should you check your credit report? As a rule of thumb, you should check your credit report once a year. If you are planning any big purchases, like a house or car, it is a good idea to check your credit report well ahead of time so you don't have any "surprises" during the loan process.
Why are my credit reports different? If you compare your credit reports side-by-side, you may notice they're not the same. That is because not all businesses report to all three credit bureaus. Credit bureaus typically do not share information so not all your account information makes it onto all three credit reports.
What does my credit report have to do with my credit score? Your credit report is a detailed history of your credit accounts including payment history, credit limit, highest balance ever charged, and age of the account. Your credit score is a numeric representation of your credit report.
Will my spouse's information appear on my credit report? Your credit report will contain only your credit and loan accounts. The exception is joint accounts shared between you and your spouse. Here, the account history will be reported on both your and your spouse's credit report. Similary, if one spouse is an authorized user on the other spouse's account or one spouse co-signs another's account, the account history will be reported on both credit reports.
How do I know if I have any late payments on any of my accounts? All three reports seem to be pretty consistent on this. They use a little "square" with either 30, 60, 90, or 120 in it and you don't want anything but a "zero" underneath that symbol. You want to see "OK" in green shown, or under "status", the notation "never late".
What does "charged-off", "bad debt", or "placed for collections" mean? This means the account went longer than 120 to 180 days without a payment from you. At this point, the credit card company decided the debt was not going to be collected from you, and decided to write it off. The company took the IRS tax deduction and sold the debt to a debt collector. Many of the recent real estate "short sales" may end up as charge-offs on a consumer's credit report.
What does "Account Closed by Credit Grantor" mean? The credit card company was worried you would default on the debt and shut down your ability to access any more of your credit line. This sometimes happens if you are defaulting on other cards - also referred to as universal default.
What does "Account Balance" mean? Fairly straightforward, this is the amount owed on the loan, whether it is a credit card balance or the balance of a home mortgage or installment loan.
What does "High Balance" mean? This is the most you ever owed on the loan, whether it is a credit card balance or the balance of a home mortgage or installment loan.
What is "Date of Last Activity" (DOLA)? This will be specified on the report as "last updated" or "last activity" and basically is the last date any account activity occurred, typically the last time you made a payment.
Credit Repair Techniques That Will Not Increase Your Credit Score
Fixing your credit and increasing your credit score takes patience and a clear understanding of the strategies that really make a difference. One goes along with the other, fix all the dings on your credit report and your credit score will go up. It's like peas and carrots, tea and honey, bread and butter, you can't have one without the other. Having said that, you need to understand what financial moves will help and what ones won't when you are laying out your credit repair plans.
Sorry to disappoint, but, there is no quick fix when it comes to fixing your credit despite what you hear from some of those fly-by-night credit repair companies. The key to inceasing your credit score is a good payment history along with some time and a healthy mix of credit types. Here are some bogus beliefs that WILL NOT help you build better credit.
Closing Old Accounts Will Boost Your Score
Closing old accounts typically won't help your score and could possibly dent it. The result can shorten your credit history and leave you with a smaller amount of available credit. The length of credit history shows how seasoned a borrower you are, so the more positive experience you have, the better. Having more available credit helps to keep your utilization rate low. The utilization rate is how much available credit a borrower uses; the lower the percentage, the better.
Opening a Bunch of Accounts Will Increase Your Score
Wrong! Some consumers believe opening many accounts will be proof that they can handle credit. Actually, it has the opposite effect. A lender will wonder why in the world this person needs all of this credit and will interpret this as a sign of a high risk borrower. What the lender will see is a boatload of "hard" inquiries on your credit report which will negatively affect your credit score.
Paying Off Those Deliquencies Will Restore Your Credit
Well yes, but not as much as you might think. Even if you pay off the deliquencies, the late payment, charge-off, or collection account will still be shown on this account albeit with a zero balance. The trick to this is to have the creditor or collection agency agree to REMOVE the deliquency in exchange for you paying off the account. See our article on "Pay for a Delete" for more information on this debt settlement tactic.
Paying Before the Due Date Helps Your Credit Score
Paying a credit card balance in full 10 days or one day ahead of the due date will not help your credit score. However, if you pay off the balance before the "statement closing date", your report will post a zero balance for that account which in turn will help your utilization rate, or how much credit you are using.
All Deliquencies Are the Same
If you find yourself in the precarious position of only having enough money at the end of the month to pay on a few debts, make sure you choose the ones to pay wisely. Having a 30- or 60-day late payment on a mortgage or auto loan dings your credit score more than say a late payment on a credit card. Of course, any late payment is bad but if you are in between a rock and hard place, pay your mortgage and car loan on time if you can.
I Need to Get Rid of ALL Negatives from My Report
In a perfect world, this would be a great thing to accomplish but sometimes there are a few negatives that just will not come off. Rest assured, having a few older dings will not crash your credit score, if, you have some good credit building techniques going on with your newer accounts. Older accounts have less "weight" than newer accounts so keeping the newer ones current is very important to increasing your credit score.
Building better credit and increasing your credit score can be shrouded in mystery and myth, but keeping some simple rules of thumb in mind will keep you on the right path. Don't think fixing your credit is going to happen overnight because it won't and don't believe anyone who tells you otherwise. Keep your nose to the grindstone and be consistent with a good payment history, diversify your accounts and keep your balances low. Follow these simple rules and your credit score will increase and your credit history will improve.
Two Myths About Collections On Credit Reports
There are two common myths about collection accounts on credit reports: 1. My credit scores will improve if I pay off collection accounts. This is very unlikely. A collection account is negative, whether it is paid or unpaid. Sometimes you may see a little bump from paying off one of these accounts, but that's not typical. 2. A collection agency must remove a collection account if I pay it off. This is also not true. Collection accounts may be reported for the time period allowed by law, regardless of whether they are paid or not. In our ebook Debt Collection Answers, we go into detail about what you can do if you have collection accounts on your credit reports. Here's a brief summary of the credit report self help repair options available to you: 1. Negotiate. Collectors aren’t obligated to remove an account just because you pay it. But if you have a legitimate dispute about the debt, you may want to push hard for this option.
2. Dispute the debt. If an item is inaccurate or incomplete you have the right to dispute it. If the collection agency does not confirm it, it must be dropped. Warning: If you haven’t paid the debt, disputing it could revive the collector’s interest in the debt. Learn how to dispute credit report mistakes. 3. File a lawsuit. If the debt is too old to be reported, or if you have legitimately disputed it, and the collector continues to report it, you may have case for credit damage under the federal Fair Credit Reporting Act. In addition, the collector may have also violated the federal Fair Debt Collection Practices Act as well as state or federal consumer protection laws. A consumer law attorney can help you determine if you have a case against the collection agency. 4. Work with a credit repair organization. There are many valid warnings about credit repair organizations, and there are very good reasons to be cautious. At the same time, some consumers find that they simply don’t have the time or energy to deal with credit report issues. In that case, hiring a professional may be useful.
Does carrying a balance on my credit card hurt my credit score?
- Closing credit cards, opening new ones, or paying down balances can impact your credit score.
- If your balance is too high, it can hurt your credit score
- Revolving credit like credit cards are beneficial because over time they can show a history of managing your credit well
- Owing more than 30% of your available “revolving” credit limit can have a negative impact
- Keep balances low, pay bills on-time and pay more than the minimum to improve your score
- Look for a good credit score simulator online – like the one on CreditKarma.com
The credit crisis has taken its toll on many consumers' immediate ability to borrow and pay down their debt as, over the last year, banks and other lending institutions have slashed credit limits and hiked interest rates in an effort to protect themselves from rising consumer defaults. But economists predict that this vastly altered consumer credit market won't be a fleeting change.
"In the previous two decades, our credit scores have become more important over time," said personal finances expert Liz Pulliam Weston ("Rules Have Changed for Consumer Credit," Chicago Tribune, April 19, 2009). "Then in the past year, it's suddenly become critical."
She warns that if consumers don't pay attention to these recent credit developments they could make some costly mistakes that could negatively affect their personal finances.
1. Credit Scores
The overhauled credit markets have polarized the world of credit scores: now there's good credit and bad credit and relatively little in between. Consumers with good credit have seen little to no effect on their financial lives, while consumers with less than stellar credit are increasingly facing higher interest rates, more stringent loan terms, and disqualification from all types of loans - home, auto, student, etc.
The Recommendation: Don't take on any more debt and start paying off your existing debt.
2. Credit Benchmarks
The qualifications for good credit and bad credit have also shifted. About a year ago a 700 to a 720 FICO credit score - the most widely used credit score formula - was considered acceptable for most consumer loans, and a 620 FICO score was considered subprime and subject to less favorable terms. Today, consumers need a 740 to a 760 credit score to get the most consumer-friendly loan and credit card terms, and consumers with a 660 to 680 score are considered subprime.
The Recommendation: Pull your credit report to see if there are any unforeseen blips or mistakes that could have dinged your score. You can get a free copy of your credit report from each of the major reporting bureaus once a year at annualcreditreport.com. For a free estimate of your credit score, you can use some of the new credit simulators at Bankrate.com, Quizzle.com, or Credit.com to get an idea of where you stand, but if you're considering taking out any new loan you may want to use a site like MyFICO.com to pull your actual credit score and see where you really fall on the new scale.
3. Credit Limits
Consumers with lower credit scores are having their credit limits slashed by credit card companies, which can severely throw off your credit utilization ratio - the ratio of your available credit to how much you've borrowed - and consequently, lower your credit score.
The Recommendation: Consumers with good credit scores, 750 and above, can try negotiating with their creditors to reinstate lines of credit, if need be. Creditors are more willing to accommodate consumers with good credit since they are harder to come by in this recession.
4. Card Cancellations
In addition to lowering limits, credit card companies are shutting down lines of credit due to low use, which may be one of the few credit changes to hurt consumers with good credit.
The Recommendation: Make sure to occasionally use the cards that you keep in the "back of your wallet" - charging some purchases at least a few times a year - and promptly pay off the balances on these cards in full.
5. FICO Score Formula Changes
One of the three major credit reporting bureaus, TransUnion, has begun using Fair Isaac's new FICO score formula, which places more emphasis on your credit utilization and ignores overdue balances of less than $100. It's unknown when or if the other credit bureaus, Equifax and Experian, will follow suit.
The Recommendation: Keep balances to below 30 percent of your available credit, and if possible, try to bring your credit utilization down to 10 percent to get better interest rates and more favorable borrowing terms on consumer loans.HOW TO OBTAIN A COPY OF YOUR CREDIT REPORT
. Your report is inaccurate detail due to fraud or identity theft
. You're unemployed and are looking for a job within the next 60 days
. If you've been turned down for a loan, you can get a free report within 60 days of denial
. You're on welfare
In order to get a free credit report, you can call the toll-free number 1-877-322-8228, or you can request for free credit report at www.annualcreditreport.com the central website set up by the credit bureaus. You can also fill out the Annual Credit Report Request form available at the website and mail it to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
However, when you aren't able to get a free credit report, you need to buy it for $10.50. If you'd like to get your credit score, you'll have to purchase it, as free credit report scores are not available.
Whether you get a free credit report or pay for it, you'll have to provide personal and financial details to the bureaus. Once you provide the details, it'll take 15 days to get the report. If you request your credit report online, you will be able to access it instantly.
What your credit report includes
Your credit report comprises of 4 sections including the personal and financial information your creditors report to the bureaus. The sections are given below:
. Personal Information: This includes -
. Your name, address & contact number
. Social security number
. Your date of birth
. Current and previous employers' names
. Tradelines: This section includes -
. The types of credit accounts or loans you have
. The date when you opened the account
. Credit limit or loan amount
. Your account balance Account Status (open, inactive, closed, paid)
. Payment history (late payments, default, charge off etc)
. Inquiries: This is the list of the creditors, lenders, and anyone else who has accessed your credit report so far. Inquiries include -
. Soft inquiry (involuntary): This occurs when you check your report/credit history or when the lender/creditor checks your report for promotional purposes.
. Hard inquiry (voluntary): This occurs when lenders or creditors pull your report when you apply for loans or credit.
. Only hard inquiries are shown to lenders when they order a copy of your report. Soft inquires are shown when you ask for your credit report.
. Public records and collections: This includes -
. Liens, judgments, foreclosure, and bankruptcies
. Wage garnishments
. Reports from State and County courts
. Collection accounts along with the name and contact details of the CA
How to read a credit report
When you start checking your credit report, you'll come across the 4 sections stated above. Only 2 sections - Tradelines and Inquiries should be read with the alphanumeric codes provided by the credit bureaus.
How to read credit report tradelines
You'll find a letter beside each tradeline or credit account stating your relationship to that account. Here's what some of the letters mean: J = Joint, I = Individual, A = authorized User, C = Co-maker, T = Terminated
When looking at the types of credit accounts, the letters mean:
O = Open account, R = revolving account and I = Installment account.
Also, there are numbers which indicate your account payment status:
0 = Approved but not yet used or too new to rate
1 = Paid as agreed
2 = Past due for 30 days or more
3 = Past due for 60 days or more
4 = Past due for 90 days or more
5 = In collection or past due for 120 days or more
7 = Making regular payments
8 = Repossession
9 = Charge off
There are also combinations like:
O1 = Paid as agreed open account
R1 = Paid as agreed revolving account.
How to read your credit report inquiries
Let's consider the codes used by Equifax:
PRM = You have been pre-approved by a creditor
AM or AR = Your creditor has pulled credit report to check if there's any change in your financial situation.
How to dispute a credit report - Credit report repair
Credit report repair or credit report help involves finding ways to fix a bad credit report that has resulted from negative or inaccurate listings. In order to remove these errors and fix your credit report, you need to send a certified letter to the bureaus and the financial institution that provided the information, and ask for credit report help.
You need to support your claim with copies of your billing statements or cancelled checks, a copy of your credit report, and a return receipt request with the certified letter. This will provide the credit bureau with evidence of the dispute. Make sure you keep a copy of everything you send to either the creditor, collection agency, or credit bureau in a safe place.
The credit bureaus take 30 days to investigate any inaccurate information. The bureaus may even send you a free credit report if there has been any change to it after they have fixed any errors.
WHAT ARE THE BASIC STEPS TO IMPROVE MY CREDIT ?
Get copies of your credit report--then make sure information is correct.
Go to www.annualcreditreport.com . This is the only authorized online source for a free credit report. Under federal law, you can get a free report from each of the three national credit reporting companies every twelve months.
You can also call 877-322-8228 or complete the Annual Credit Report Request Form and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
IT GOES WITHOUT SAYING, PAY YOUR BILLS ON TIME.
One of the most important things you can do to improve your credit score is pay your bills by the due date. You can set up automatic payments from your bank account to help you pay on time, but be sure you have enough money in your account to avoid overdraft fees.
UNDERSTAND HOW YOUR CREDIT SCORE IS DETERMINED.
Your credit score is usually based on the answers to these questions:
• Do you pay your bills on time? The answer to this question is very important. If you have paid bills late, have had an account referred to a collection agency, or have ever declared bankruptcy, this history will show up in your credit report.
• What is your outstanding debt? Many scoring models compare the amount of debt you have and your credit limits. If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score.
• How long is your credit history? A short credit history may have a negative effect on your score, but a short history can be offset by other factors, such as timely payments and low balances.
• Have you applied for new credit recently? If you have applied for too many new accounts recently, that may negatively affect your score. However, if you request a copy of your own credit report, or if creditors are monitoring your account or looking at credit reports to make prescreened credit offers, these inquiries about your credit history are not counted as applications for credit.
• How many and what types of credit accounts do you have? Many credit-scoring models consider the number and type of credit accounts you have. A mix of installment loans and credit cards may improve your score. However, too many finance company accounts or credit cards might hurt your score.
To learn more about credit scoring, see the Federal Trade Commission's website, Facts for Consumers.
LEARN THE LEGAL STEPS TO TAKE TO IMPROVE YOUR CREDIT REPORT.
The Federal Trade Commission's "Building a Better Credit Report" has information on correcting errors in your report, tips on dealing with debt and avoiding scams--and more.
BEWARE OF CREDIT-REPAIR SCAMS.
Sometimes doing it yourself is the best way to repair your credit. The Federal Trade Commission's "Credit Repair: How to Help Yourself" explains how you can improve your creditworthiness and lists legitimate resources for low-cost or no-cost help.
Repair Your Credit Score and Report On Your Own - Simple Steps to Fix Your Credit
Repair your credit on your own? Yes you can! Thousands of our readers have removed negatives from their credit reports using the techniques on this page. By the way, everything a credit repair company can do for you, you can do for yourself at a fraction of the cost.
However, we know sometimes people feel overwhelmed with the credit repair process and want to ask a live person a question if they get stumped. If you do, call the Credit Card defense Center of New York. We offer a FREE initial credit consultation and they use the same ethical credit repair techniques we talk about on our website.
Now, before you get started, it's important to know the methods that don't work and can actually hurt. .
The information provided on this page is mainly intended to help you fix ERRORS on your credit and clean up those "questionable" items. However, the law does allow you to request an investigation of ANY information in your file that you dispute as inaccurate or incomplete. It is perfectly legal to challenge ANYTHING in your credit bureau file. Anything at all.
There is no charge for requesting an investigation. The whole key to the credit repair procedure is that if the cannot verify information on your credit report within the time allowed by law, they must remove it. For instance, if a credit bureau cannot contact a collection agency which is reporting a collection on your report, they cannot verify the information, and the credit bureau must delete the entry.
Pay for Delete Technique
1. Write the collection agency and offer to pay the amount in full (or at whatever amount you feel you can sell them on) in return for removing the collection account. Points to note in the letter:
◦ Mention the fact that they have not given you any kind of documentation on the debt, validating it is yours or that they are legally entitled to collect the debt.
◦ Tell them that you prefer just to pay this debt rather than hire an expensive attorney to sue them in court.
◦ Present your offer as a business deal - remind them of the handsome profit they are about to make on this deal by accepting your offer.
2. Attach a settlement offer.
3. Wait until you receive a signed, written acceptance of your offer from the collection agency.
Once you have a written, signed agreement (a fax is fine), send the collection agency a money order or cashier's check for the amount you agreed to pay them.
How to Raise Your Credit Score
If you’re concerned your credit score isn’t up to snuff, you may be looking for a few simple ways to raise it.
If you maintain a healthy credit score, you’ll gain access to the best credit cards and the lowest interest rates, and you won’t be denied financing for large purchases such as auto loans or home mortgages (at least based on credit score alone).
But how do you raise your credit score and actually maintain it?
Well, there are a number of practical, simple ways to attain a high credit score and keep it that way. But remember, there is no automatic, easy way to raise a credit score. Below are a few useful tips on “how to raise your credit score”.
- Setting up automatic payments is a simple, easy way to help you
stay current and keep from missing payments.
- Keep your debt-to-credit ratio as low as you can.
- Before you open a new credit account of any
kind, consider how it could impact your credit.
Pay on Time
The first step to achieving a high credit score is to pay all your bills on time. It’s a simple rule, but one many borrowers seem to grapple with for one reason or another. There are no excuses for a late payment. Make your payments on time and your credit score will thank you.
This is by far the best and easiest way to raise your credit score. After all, the immensely popular Fico score algorithm relies heaviest on payment history.
Of course, this method takes time, and the longer you make on-time payments, the more your credit score will benefit. Conversely, missed payments can sink your credit score in a hurry.
Increase your Available Credit
Another lesser known method to raise your credit score is to raise your available credit limits. Suppose you have 2 credit cards, one with a $2,000 limit and another with a $3,000 limit. And assume you have a balance of $1,000 on the first card and $1,500 on the second card.
Card A: $1,000 balance – $2,000 limit Card B: $1,500 balance – $3,000 limit
In the above example, you’d be using $2,500 of $5,000 available, or 50% of your available credit. If you contact your creditors, either via their website or by phone, and ask for a credit line increase, they’ll more than likely oblige.
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Say you ask for a credit line increase on both and they raise Card A to $4,000 and Card B to $6,000. You’d now have $10,000 combined credit, and still only $2,500 used. That would raise your available credit to 75%. And more the available credit you have, the higher your credit score. Obviously a bank or creditor would be more willing to lend to someone with more room to spend than someone that is nearly maxed out on their existing cards.
Keep in mind that you usually can’t raise your credit limits until your card has been open at least six months, and your credit score may temporarily drop as a result of the new credit request, so don’t try this if you’re attempting to raise your credit score in a short period of time.
Pay Down Debt
Along the same lines, another way to raise those credit scores is to pay down debt. Keep your debts low, but your credit cards open and active and your score will go up. The less debt you have, the more available credit, the better you look to potential creditors.
You may hear people tell you to cut up your credit cards or close your accounts. But if you do this, you’ll lose those lines of available credit. Sure you might not use those accounts to rack up more debt, but imagine if you close two credit cards, and drop your total credit from $50,000 to $25,000. You’re total available credit ratio will drop fast, and so will your credit score. So always keep credit cards open and active.
It Takes Time
That ties into another important tip. Credit depth and history play an important role, so keeping your cards open for a long period of time provides history, and multiple cards or loans provide depth. If you open three credit cards in a month with no previous credit history, most banks or lenders will deny you any serious credit. Banks and lenders want to see your habits through time, not in the last month. You need to prove yourself, just as you would on a job resume.
Aside from these tips, it’s recommended that you order a free credit report at Annualcreditreport.com and review it for any possible errors, collections, charge-offs, or late payments. Just note that these reports don’t contain a free credit score.
If anything seems to be reporting in error, you can dispute it with the particular creditor and see that it gets corrected. Collections and charge-offs can kill your credit score, so it’s essential to make sure there aren’t any instances of such things on your credit report.
Check your credit report annually. Visit AnnualCreditReport.com to get free copies of your Experian, TransUnion and Equifax reports.
How to Fix Credit Report Errors
The importance of your Experian, Equifax, and TransUnion credit reports cannot be understated, as all credit scores are based on the information in these reports and your credit standing dictates the credit card and loan terms that you qualify for, where you are able to live, the car you drive, and even the jobs you can get. But while certain types of information should be included in your credit reports, errors are not among them.
Credit report errors are unfortunately an all too common fact of life, however. The Federal Trade Commission estimates that roughly 1 in 5 people (or about 42 million Americans) have an inaccurate credit report, and other studies indicate that the prevalence of credit report mistakes is even higher. For example, the non-profit group American Consumer Credit Counseling pegs the error rate at an astounding 90%.
Forget the statistics, though. All it takes is a single critical error on one of your major credit reports for a lender, landlord, employer, or other decision maker to decide that you aren’t trustworthy and to either deny your application or overcharge you.
This, of course, underscores the importance of exercising your right to a free copy of each of your three major credit reports once every 12 months through the government-sponsored website AnnualCreditReport.com. Reviewing these reports on a regular basis will enable you to spot potentially-costly mistakes before they can do too much damage, but the question of what to do about mistakes once you find them still remains.
So, how can you report and ultimately fix credit report errors? We answer that question and more below.
• What You Can Dispute
• How to Dispute Credit Report Errors
• File a Complaint with the Government
What You Can Dispute
It’s important to note right off the bat that you cannot use the credit report dispute process to remove legitimate information from your files, even if it reflects poorly on your financial responsibility and is costing you money.
There are strict timeframes that dictate how long negative information must remain on your credit reports, and there’s unfortunately nothing you can do to expedite the process. If past financial mistakes were the result of extenuating circumstances, you may be able to explain your situation on the Personal Statement portion of your credit report. But other than that, if the information is accurate, you can’t get it removed.
“Fixing erroneous information on the reports can be hard because the credit reporting agencies won’t (and shouldn’t) erase an incident just because someone says it did not happen,” according to Michael Salinger, the Jacqueline J. and Arthur S. Bahr Professor in Management, Markets, Public Policy and Law at Boston University. “But it is worth being persistent if your record does contain false incidents of non-payment.”
With that said, there are a number of common credit report errors that are indeed disputable, including:
• Inaccurate Biographical Information (e.g. a misspelled name or outdated address)
• Duplicate Accounts (sometimes financial institutions or the credit bureaus mistakenly list credit or loan accounts multiple times; in other cases debt collectors will relist accounts in order to trick you into making a payment)
• Fraudulent Accounts (criminals are known to open financial accounts under people’s names, rack up extensive charges, and leave the victims to clean up the mess)
• Inaccurate Payment History (payments mistakenly listed as being late)
The source of the mistake doesn’t really matter as long as you have proof of its inaccuracy, but Dan Green, loan officer with Waterstone Mortgage in Cincinnati and author of The Mortgage Reports, says that creditors themselves are usually to blame. “Credit report errors often begin with the creditors — not the credit bureaus,” he says. “Credit bureaus are just a messenger.”
Nevertheless, it’s on the consumer to start cleaning up the mess.
“The credit bureaus rely on information available in public records. Oftentimes, that information is wrong or how it is reported is wrong. Unfortunately, it’s up to the consumer to monitor for errors and correct them,” says Jessica Gabel, associate professor of law at Georgia State University. “Moreover, there’s nothing that really polices the agencies to do their fact checking. If there’s a negative event found, it goes into the credit report. I’m not sure that more competition in the industry would really change much. They all have to get the information from the same places and the time, money and effort involved in verifying facts would probably be cost prohibitive, so we’re stuck with this system.”
The Dispute Process
Step 1: Contact the Source
Much like credit scoring companies get their information from Experian, Equifax, and TransUnion, these major credit bureaus base their reports on information from the financial institutions that actually extend loans and lines of credit as well as the court systems that hear lawsuits and lay out other judgments about amounts owed. The first step in the credit report error dispute process is therefore to contact the entity that the erroneous information originates from. You can find the relevant contact information online or on your monthly statement, if applicable.
Oftentimes, the error will be the result of an honest mistake and can be easily corrected with a quick phone call. If the outcome is positive, that’s great – it will make the dispute much easier for the credit bureaus to handle. You should still report the issue to them, however, because the information sharing processes between financial institutions and credit reporting agencies are so complicated and convoluted that an issuer correcting a mistake doesn’t guarantee that the change will be reflected on your credit files.
Step 2: Build Your Case
The major credit bureaus all track the same types of information, but that doesn’t mean your records will match up exactly on each. So while an error might therefore appear on only one of your credit reports, you should still check all of them to be sure.
You can dispute credit report errors online or by mail, and we’ll explain how each method works below. But regardless of the manner in which you report mistakes, you’ll need to build your case before bringing it to a bureau’s attention. Otherwise, you’ll just be wasting your time because the bureau will likely ask for documentation.
Here’s what you’ll need:
• A Copy of the Report Containing the Error (If Disputing By Mail): Print out your erroneous credit report(s), make copies, and note where the errors appear.
• Your Financial Records: You should gather all relevant financial records (e.g. monthly statements from the institution the erroneous information supposedly originates from) that prove your case. If Step 1 resulted in a favorable outcome, asking the financial institution for a letter acknowledging its mistake can go a long way.
• Correspondence Records: Whether you’re disputing online or by mail, you’ll want to keep copies of your dealings with the credit bureaus. This may entail printing an online dispute confirmation or making a copy of the letter you send to initiate the dispute.Such a letter should include your full name, your current address, the confirmation number for the report in question, and the account number of any relevant trade lines. You can find a sample credit report dispute letter below.
Sample Dispute Letter
Step 3: Initiate the Dispute
Disputing credit report mistakes online is the simplest option, as the online version of each of your major credit reports will include a link that you can click to begin the process. Alternatively, you can visit each bureau’s online dispute page directly: Experian, Equifax, and TransUnion. The image below shows what this page looks like on the Experian website.
Once you arrive at this page and choose the option relevant to your situation, you’ll have to verify your identity and enter your report number. You’ll then be able to peruse your report, find the error in question, click the “Dispute” button on the page, choose the reason for your dispute from a drop down menu, and provide a short explanation of why you believe the information to be erroneous on the online dispute form.
After you submit your dispute, you’ll be redirected to a confirmation page, which you should print for your records. Once you’ve done so, it’s time to wait.
You can also dispute credit report errors by mail. To do so, send your dispute letter as well as the printed copies of your credit report(s) and your relevant financial records to the credit bureau(s) whose reports contain the errors.
Experian / P.O. Box 9701 / Allen, TX 75013
Equifax Information Services, LLC / P.O. Box 740256 / Atlanta, GA 30374
TransUnion, LLC / P.O. Box 2000 / Chester, PA 19022
You can certainly give the credit bureaus a call in an attempt to initiate a credit report dispute by phone, but they’ll likely tell you that written correspondence and a certain amount of evidence are necessary.
With that said, it’s probably a good idea to call the bureaus once you have submitted your dispute form online or through the mail to ensure that they’ve received it and the process is moving forward.
Step 4: The Waiting Game
Once a credit report dispute has been initiated, the respective credit bureau will contact the financial institution from which the information originates (i.e. the “furnisher”) in order to verify whether it is legitimate or erroneous. Information furnishers typically have up to 30 days (and in some cases 45 days) to respond to such inquiries, but the process takes an average of 14 days, according to Experian.
Step 5: Results
Once a bureau’s investigation is complete, it will mail you the results as well as e-mail you a link to where you can view the results online, if you file your dispute via the Internet. These results will lay out the bureau’s findings as well as the actions to be taken based on them (i.e. leaving your report as is or removing the error).
If your dispute results in changes to the information in your credit report, the credit bureau in question is required under the Fair Credit Reporting Act (FCRA) to send a disclosure of the change to anyone who has viewed your report in the past 6 months, upon your request. You can also request that updated copies of your report be sent to any potential employer that has viewed your report in the past two years. We definitely recommend making such requests if you believe that the mistake in question is adversely affecting you.
File a Complaint with the Government
If you are unhappy with the results of the credit bureau’s investigation, you can always initiate another dispute, but keep in mind that this in unlikely to change anything unless you bring forth new evidence in support of your case.
You can also escalate your case to the FTC or the Consumer Financial Protection Bureau, if necessary. If a credit report error is serious enough, you may also wish to hire an attorney that specializes in such matters.
At the end of the day, mistakes on your credit reports should not be taken lightly given how much money and time they can end up costing you. So, if you believe your dispute to be legitimate, do not get frustrated if the process takes a while or you run into a few roadblocks along the way. Instead, trust the process and explore every option at your disposal.
This does not include paying credit “repair” services that promise miracle fixes. “A bad credit report and low score will drive some percentage of the public to take steps to fix it, where they are unable or unwilling to ‘fix’ it via the long and hard process of reducing debt, reducing the percentage of credit lines used, increasing income, etc.” says attorney Cary Flitter, a leading expert in consumer law. “Many credit repair places take advantage because they use unscrupulous methods to try to increase the credit score.”
Michael Salinger, a professor of management at Boston University and the former director of the Federal Trade Commission’s Bureau of Economics adds: “There are a lot of fraudulent services out there offering to help people fix financial problems. When I was at the FTC, we sued a lot of them. But eliminating the fraudulent companies is like playing Whack-a-mole.”
So, remember: There aren’t any silver bullets when it comes to fixing credit report errors, and you’re better off saving the money.