A government study finds credit bureau mistakes are rampant, so here’s how to check your reports and make them accurate
The Federal Trade Commission just issued a study showing how frighteningly common credit report errors are and why you need to fix any mistakes on yours.
The FTC surveyed 1,101 people who reviewed their 2,968 credit reports to look for errors. The results:
- Roughly 1 in 5 (21 percent) found a mistake on at least one of their credit bureau reports.
- Some 5 percent had errors that were serious enough for them to be denied credit or to pay higher interest rates than appropriate.
- Nearly 1 in 10 saw an improvement in their credit score after getting their report changed – in some cases by more than 25 points.
“These are eye-opening numbers for American consumers,” said Howard Shelanski, director of the FTC Bureau of Economics.
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But here’s one upsetting statistic from the FTC’s report: Half the people whose credit reports were amended after they complained still had information on their reports they alleged was inaccurate.
The FTC’s findings echo the results of the scathing series by The Columbus Dispatch that I blogged about last spring.
Credit Bureaus Often Fail to Fix Errors
It found rampant errors on credit reports from the three big credit bureaus (Equifax, Experian and TransUnion), but noted that the bureaus often do a lousy job correcting errors after consumers contact them.
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The newspaper reviewed nearly 30,000 consumer complaints filed with the Federal Trade Commission and state attorneys general involving the big credit bureaus. More than half of the people who filed complaints with the FTC said they couldn’t get the credit bureaus to fix the problems on their credit reports.
As a result of the credit report mistakes, lenders considered the consumers bad credit risks and consequently rejected them for mortgages, car loans, college loans and checking accounts; denied them medical care; and threatened to garnish their wages.
The reason credit bureaus repeatedly failed to fix the mistakes? They don’t have to.
The bureaus must investigate errors that consumers report, but the law doesn’t say how they need to do this or even that they need to resolve the complaints. There are no penalties for including inaccurate information in credit reports. And, industry observers told The Dispatch, there’s no incentive for credit agencies to fix mistakes since their paying customers are the creditors, not consumers.
How to Keep Credit Reports Accurate
So, let me repeat The Dispatch’s advice:
Check your credit reports for free once a year. Go to the website Annualcreditreport.com to do it. While everyone, by law, is entitled to receive a free report once every 12 months from each of the three nationwide consumer credit reporting companies, you can also get yours any time for free if you’ve been denied credit within the past 60 days, are out of work and job hunting, or are a fraud victim.
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Scrutinize every credit-card offer that comes in the mail. If you see your name misspelled or any other personal information in error, this can be a sign that there’s something wrong in your credit report.
If you see a mistake in your credit report, complain to your state attorney general’s office as well as to the credit bureaus. Enforcement officials tend to get results more often than consumers do. State the error and send copies of the supporting evidence in the mail to the attorney general and to each of the credit reporting agencies. Ask that the erroneous information be deleted or corrected. Be sure to keep a copy of what you send. The mailing addresses are: Equifax, P.O. Box 740241, Atlanta, Ga. 30374-0241; Experian, P.O. Box 2104, Allen, Texas 75013-0949; and TransUnion, P.O. Box 1000, Chester, Pa. 19022.
Contact the original source of the error. If the mistake relates to a bank loan or a credit card, get in touch with that institution directly to fix the error in its database. Do this in writing with copies of documents supporting your position.
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Next Avenue on FacebookNext Avenue on TwitterEmail Next AvenueRichard Eisenbergis the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of "How to Avoid a Mid-Life Financial Crisis" and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch.Read More
FAQs
Checking your credit history and credit scores can help you better understand your current credit position. Regularly checking your credit reports can help you be more aware of what lenders may see. Checking your credit reports can also help you detect any inaccurate or incomplete information.
Why is it important to review your credit report for errors? ›
Errors on your credit reports can negatively affect your credit scores and ability to get a loan. Reviewing your reports on a regular basis can also help you monitor for things like identity theft and fraud.
Why is it important to check your credit report? ›
Checking your credit report regularly allows you to be aware of activity that seems suspicious or potentially fraudulent. Be sure to look out for any information that stands out. This could be accounts you don't remember opening, payments you didn't make and more.
Why is it important for you to review your credit report choose all correct answers? ›
Reviewing your credit reports annually helps you catch errors, detect identity theft, and ensure your financial records are accurate. This proactive step can protect your credit score and ensure you're in good standing when applying for loans or credit.
How often should you check your credit report for errors? ›
It's good to check your credit reports at least once a year. You can receive free copies of your credit reports every 12 months from annualcreditreport.com.
Why is it important to report errors? ›
Reporting (providing accounts of mistakes) and disclosing (sharing with patients and significant others) actual errors and near misses provide opportunities to reduce the effects of errors and prevent the likelihood of future errors by, in effect, warning others about the potential risk of harm.
How important is it to check the accuracy of your credit reports? ›
Your credit scores and credit history are among the factors that may determine your loan terms, including interest rate, and it's important to ensure the information on your credit reports is accurate and complete.
Why is the credit information report important? ›
A credit report is a detailed account of your credit history. They're an important measure of your financial reliability. Your credit report might be used in a variety of situations, from getting a credit card to buying a house – or even applying for a job.
What is most important about your credit report? ›
Payment history (35%): Payment history is the most important factor in your FICO Score and shows how you've managed your debt payments over time. Amounts owed (30%): FICO Scores focus on your credit utilization, or the amount of revolving credit you use, especially with credit cards.
Why do credit reports matter? ›
Lenders check your score to determine whether you will be eligible for a loan. The larger the loan, the stricter the requirements. A poor credit score can hold you back from buying a house, a car, or getting a personal loan. Interest rates on loans.
You can look for:
- Accounts you don't remember opening.
- Collection accounts for bills you didn't owe.
- Incorrect credit limits, loan balances or payment amounts on your accounts.
- The same account being reported as open in two different areas.
- Accounts reported as closed when they're open or open when they're closed.
Getting your credit report can help protect your credit history from errors and help you spot signs of identity theft. Check to be sure the information is accurate, complete, and up-to-date. It's important to do this at least once a year. Be sure to check before you apply for credit, a loan, insurance, or a job.
What are the reasons why your credit rating is so important? ›
Companies use credit scores to make decisions on whether to offer you a mortgage, credit card, auto loan, and other credit products, as well as for tenant screening and insurance. They are also used to determine the interest rate and credit limit you receive.
Why is it important to correct errors on credit report? ›
You want your credit report to be accurate because it affects whether you can borrow money — and how much you'll pay — to borrow money. It also may affect getting a job or insurance, or renting a place to live.
Why is it important to check your credit report how often? ›
You may find that you check your credit score more often than your credit report, but both are critical pieces of information to monitor. Checking your credit report regularly — about four times a year or more — may help you keep track of your finances and make adjustments as needed.
How do I check my credit report for errors? ›
“The best way to access it is through AnnualCreditReport.com. This is the only way to get a free credit report under federal law... What some people like to do is stagger their requests throughout the year from each credit bureau. This means you can [request a credit report] every four months,” Pritchard explains.
What is the benefit of reviewing your credit report? ›
Regularly reviewing your credit report gives you an excellent opportunity to check your financial progress. It shows your current debt, debt you have paid off, and reveals if you are making payments on time.
What is the importance of credit review? ›
The primary purpose of a credit review in the eyes of creditors is three-fold: 1) to determine if the potential borrower is a good credit risk; 2) to examine a prospective borrower's credit history, and 3) to reveal potentially negative data.
Why would you care if the information on your credit report is wrong? ›
Errors on your credit report can affect your credit score and your ability to get a loan or rent a property. Learn about the types of errors and how to correct them.
Why is it important to monitor and review credit terms? ›
Ultimately, credit monitoring enables you to understand your creditworthiness and take prompt action to address any issues that might arise.
