Credit reports are often littered with errors. A survey conducted in 2004 by the U.S. Public Interest Research Group found that about one in four credit reports contains errors serious enough to keep people from obtaining big-ticket items like home loans.
This survey, which looked at responses from 200 adults in 30 states, also found that:
- Seventy-nine percent (79%) of the credit reports contained mistakes of some kind;
- Fifty-four percent (54%) of the credit reports contained personal demographic identifying information that was misspelled, long-outdated, belonged to a stranger, or was otherwise incorrect;
- Thirty percent (30%) of the credit reports contained credit accounts that had been closed by the consumer but incorrectly remained listed as open.
This is why it’s so important to check your report regularly. You can access your credit report for free once every 12 months at Annual Credit Report.com, a service provided by the country’s three major credit reporting agencies.
Scour your credit reports line by line. Look for any credit cards, installment loans or anything else that shouldn’t be there. If you’re 30 years old and there’s a 17-year-old credit card account on your profile, it’s probably safe to say it isn’t yours. It’s not uncommon to find a foreign account on your report, especially if you have a common name.
That can spell serious trouble for your credit score if someone else’s account is delinquent, littered with late payments or swollen with a huge balance.
When viewing your credit report online, you can easily dispute incorrect items by following the directions on screen. You can also dispute inaccuracies in writing. The FTC has an excellent sample dispute letter.
Either way, make sure to dispute an incorrect item with every credit agency reporting it and not just to one. Each is legally required to alert the others if an investigation determines that there’s something wrong on your credit report, but it’s always a good idea to hit all three.
In some cases, it’s better to take your dispute directly to the source instead of the reporting bureaus. Fixing mistakes and clearing up inaccuracies with the original creditor can prove equally effective, if not more so. They can easily contact the credit monitoring agencies and update them with more accurate information.
You should also be prepared to back up your claims with documentation. Disputing items online is a simple, click-happy process. But if you’re disputing late payments or other major inaccuracies, you’re probably going to need canceled checks, bank statements or other verifiable documents that support your contention.
It’s not just a matter of submit and forget.
The agencies usually have 30 days to investigate your disputes. They will respond via the same channel you sent your request, either email or regular mail. In most cases, it takes another 45 days for the updated information and newly calculated credit score to hit your report.
Lean on a Loan Officer
Clearing your report of inaccuracies and errors can make a huge difference in your credit score. It takes nothing but time and a little patience.
We also recommend that military buyers lean on their loan officers when the time comes to dispute credit report inaccuracies. The credit agencies actually service the lending industry, which means loan officers can usually get things done a lot faster and with considerably less headache. It’s a competitive space, and credit companies that respond quickly and work seamlessly with loan officers tend to get their contracts renewed.
If for some reason you’re not satisfied with the results of the investigation, you have the right to ask the credit agencies to include in your report a statement addressing the dispute. You can also ask the agencies to give that statement to anyone who got a copy of your credit report in the few months prior. But the hard truth is that these statements of explanation don’t mean much to mortgage lenders. They’re looking at the bottom line, which in this case is your score.