Consumer groups estimate that 70% of all credit reports have mistakes in them. That’s an awful lot of misinformation – and it could be costing you money. If you have errors in your credit file and you’re in the market for a loan, you could wind up paying a lot more in interest than you rightfully should.
Mistakes happen for a lot of reasons. Sometimes there’s an inputting error by a clerk who erroneously types something, like the spelling of your name, and then you get confused with someone else. Or maybe one of the digits in your social security number is inadvertently transposed, and inaccurate information starts to be reported about you.
In other cases, family members have found that their credit files somehow get mistakenly co-mingled. For instance, Fred Jones Jr. might find that his credit report lists some accounts that belong to his father, Fred Jones Sr. Whatever the cause, mistakes in your credit should be dealt with as soon as you discover them.
Fix Errors and Protect Your Credit
Also, because of the massive amounts of credit information flying around, it’s no wonder that mistakes routinely occur. Roughly 100,000 organizations supply information to the credit reporting agencies. These organizations include banks, lenders, collection agencies, credit card companies, leasing firms, utility companies and any other entity that extends credit or reports information about you. The average person’s credit report is updated five times each day.
Five billion pieces of information are added to credit files every month. And two million credit reports are ordered on a daily basis from credit bureaus. We all know about the dominant players in the credit bureau industry – Equifax, Experian and TransUnion – but there are actually more than 1,000 consumer reporting agencies in the United States. Clearly, because of sheer volume alone, errors in credit files are bound to happen. But if there’s a mistake in your credit report, it’s up to you to fix it.
The Dispute Resolution Process
Each credit bureau has a dispute resolution process that requires you to you write a letter to the credit agency and state what information is inaccurate or incomplete in your credit file. Under the Fair Credit Reporting Act, the credit bureau has 30 days to investigate your claims and notify you of the results.
Writing the credit bureaus is typically most effective when there is identity confusion, when personal information about you is listed incorrectly, or when your file contains completely wrong data – such as account that you never opened.
What To Do When Your Creditors Report Misinformation
But let’s say that you find an error based on misinformation that was supplied by one of your creditors. This would be the case if you closed an account, yet the account still shows open; if you have been reported as paying late, but you actually made your payment on time; or if you paid off an account, but the your credit report still shows a balance. In all of these instances, it’s best to contact the source of the information and ask them to fix the mistake.
If it’s a legitimate error, without much to dispute, the company will readily address the problem. Even if they have to do their own investigation – perhaps because your claim is not so cut-and-dried – it’s usually better to start with the creditor.
The reason is that when you dispute something with the credit bureau, that information may get changed, but then the next month it’s possible that it could re-appear in your credit file. Errors that are disputed and resolved at the creditor level are far more likely to remain off of your credit report.
Applying for a Mortgage? Fix Credit Mistakes in Just 2 Days
Updates to your credit file usually take about 30 to 45 days to happen. However, if you’re in the market for a mortgage, you can have mistakes in your credit report fixed in as little as 48 hours. It’s through a process called “Credit Re-Scoring.”
It allows mortgage bankers to submit proof of a mistake in your credit file directly to the credit agencies. In turn, those agencies give your file priority status, and quickly update your credit information electronically. This way, an error in your credit file doesn’t cost you more money or jeopardize your chance to get that mortgage.