Credit reports are crucial to demonstrating your financial health and creditworthiness. The information contained in credit reports are heavily relied upon when consumers apply for loans, credit, housing, insurance, and employment. Credit reports detail your debt and credit activity, credit limits, loan amounts, payment history, and lender information. The more positive your credit report, the better you appear to lenders and other businesses.
Credit reporting agencies (CRAs) compile monthly reports on more than 200 million American consumers which they sell to various businesses who utilize them to determine whether to lend money, extend credit, offer insurance, and more. In the United States, there are three major CRAs: Equifax, TransUnion, and Experian.
Negative information reduces your credit score and makes you appear as more of a liability to prospective lenders, businesses, and landlords, and may even cost you that dream job. However, what if the negative information in your credit report is incorrect?
According to the Federal Trade Commission (FTC), one in five people have at least one error in their credit report. In fact, the Consumer Financial Protection Bureau (CFPB) states that credit report errors are the agency’s most common complaint, 61 percent of which stemmed from incorrect information.
Along with credit reports, each consumer is assigned a credit score, which changes monthly based on your financial activity of the previous month. Credit scores are generated by two companies, VantageScore and the Fair Isaac Corporation (FICO), who use the information gleaned from your credit report to generate a score. While both companies may receive the same information, your score may differ, depending on how each weighs the data and whether your lenders sent your information to only one or all three of the CRAs.
Credit scores provide a quick overview of your financial responsibility. The higher the score, the more creditworthy you appear to potential lenders. The lower your score, the less likely you will be able to secure loans or credit.
Negative information in your credit report can have serious consequences and prevent you from securing credit or loans. In addition to late or missed payments, negative information can also include your overall credit-to-debt ratio, bankruptcies, repossessions, and negative public records, which can legally remain on a credit report for up to seven years.
Under the Fair Credit Reporting Act (FCRA), lenders and credit agencies must follow federal regulations to ensure the information in your credit report is accurate and fair. Entities such as financial institutions, medical record sales, renters, and employers who use credit reports during the hiring process are also included under FCRA regulations. While these measures are in place and are largely successful, credit reports can still contain errors.
Under the FCRA, all consumers are entitled to dispute incorrect information contained in credit reports, and CRAs are required to investigate all disputes requested. Dispute investigations must be completed within 30 days of the CRA receiving the request, and the more information you provide from the start, the quicker and easier the investigation will be resolved.
When filing a dispute, draft a written letter explaining what information you believe to be false in your credit report, ask for it to be corrected, and include any applicable supporting documents, such as:
- Copies of the negative credit reports, noting the incorrect information.
- Credit card statements.
- Loan documents.
- Birth records, death certificates, or divorce documents.
- Social Security number.
- Copies of government-issued identification, such as a driver’s license or passport, to prove your identity.
- Utility bills, insurance, or banking information confirming your addresses.
- All addresses, current and past, for the last two years.
Once complete, mail the packet to the CRA responsible for the report or all three agencies. Send the packet as certified mail, which requires signature confirmation that the agency received your dispute and information. This will also provide you with delivery confirmation and the date for which the 30-day investigation period begins.
The best way to protect yourself against errors in your credit report is to regularly review yours for any incorrect or misleading information. All consumers are entitled to one free report per year from each of the CRAs: Experian, Equifax, and TransUnion. Each one also offers paid subscriptions, allowing you to check your credit report any time, as often as you like. The more familiar you are with the information contained in your credit report, the easier it will be for you to spot inconsistencies and errors.
What Are Some Common Credit Report Errors?
Incorrect and misleading information typically has a negative effect on an individual’s credit reports and scores. Commonly seen errors include:
- Incorrect identity information, such as the wrong name, Social Security number, address, or phone, among others.
- Incorrect balances or credit limits on accounts.
- Current accounts that are reported as late or delinquent.
- Multiple listings of the same debt, sometimes caused by a different name on the account.
- Closed accounts still reported as being open.
- Incorrectly identified as the owner of an account rather than an authorized administrator.
- Incorrect dates on accounts, such as the date opened, date of last payment, or first date of delinquency.
- Accounts belonging to others with a similar or same name.
- Reinstating incorrect information after previously correcting it.
- Multiple listings of the same account, but with different creditors, such as delinquency or collections.
- Old and outdated information that is no longer relevant.
In addition to these, there are four more serious errors that can cause severe damage to your credit, each having significant consequences:
- Identity theft: One of the fastest and most common damage to credit reports is identity theft. Criminals steal your personal information and use it to open multiple accounts, purchase a car, take out loans, and much more, typically spending the maximum amount in each account quickly before the theft is caught. As the bills for these accounts go unpaid for many months, the financial damage to you continues to build, severely affecting your credit report and overall creditworthiness. The majority of damage caused by identity theft can be undone, but the process can sometimes take years and be costly.
- Deceased: If one or more of your accounts are reported as being associated with a deceased person, or your Social Security number is reported as deceased, it can throw your whole life into a tailspin. As “deceased,” you cannot open bank accounts, buy a house, obtain or renew a driver’s license, find employment, secure health insurance, and much more. While a deceased error can be corrected more quickly than identity theft, the associated problems are more immediate and extensive.
- Criminal history: Incorrect or misleading information contained in your criminal background check can be quite damaging, especially to secure loans or find employment. This type of error is usually traced back to a blending of your information with someone else’s, typically with the same or similar name, or outdated records.
- OFAC alerts: An Office of Foreign Assets Control (OFAC) alert can be placed in reports if your name matches one on the Specially Designated National’s list of suspected terrorists, drug traffickers, money launderers, and those legally barred from conducting business in the United States.
Pittsburgh Credit Report Lawyers at East End Trial Group Help Clients Discover and Repair Credit Report Errors
Credit reports are a crucial part of determining your creditworthiness and your ability to secure financing, housing, insurance, and employment. Errors in your report can be devastating and impact many aspects of your life. If you have discovered errors in your credit reports, one of our experienced Pittsburgh credit report lawyers at East End Trial Group can help. Call us at 412-223-5740 or contact us online for a free consultation. Located in Pittsburgh, we serve clients throughout Pennsylvania.