Have You Checked Your Credit Report Lately?

There’s little doubt that credit and credit scores are critically important for any type of loan, whether it’s for a car, boat or house. It’s a big deal when credit data is wrong and it turns out that errors are found in one of every four credit reports, errors that could cost you money or even lead to a loan rejection.

A new study from the Federal Trade Commission shows that a quarter of all credit reports include errors. When a credit report is wrong, the result can be a lower credit score, but the good news is that when consumers ask for a correction, they get relief about 80 percent of the time.

credit report

When consumers ask for a correction on their credit report, they get relief 80 percent of the time.

‘Ocean of Data’

In an age where just about everything is reported, recorded and stored electronically it might seem strange that credit reports contain so many errors, but actually it’s the ocean of data which is largely responsible for an assortment of mistakes and goofs. There’s so much information from so many sources that errors are inevitable. Worse, in some instances the problem isn’t a mistake, it’s a case of fraud or identity theft.

The impact from errors at first glance seems minor – the FTC study found that only five percent of the consumers who complained saw their scores rise by at least 25 points. However, 25 points in some cases can be the difference between a loan or no loan, and between a low interest rate and something higher.

For those looking at VA loans the issue of credit accuracy is important. VA mortgages are only available to those with qualifying credit, they are not granted automatically. This means a little time with credit reports can yield big benefits.

Issues with Credit Report Checking

There are several issues associated with credit report checking.

First, you want to review your credit several times a year. Under the Fair and Accurate Credit Transactions Act (FACTA) you are entitled to one free credit report every 12 months from each of the three major credit reporting agencies. That means you can get one report every four months (three per year) without cost or charge by going to AnnualCreditReport.com, a centralized service developed by the three major credit reporting agencies and the FTC.

Second, active duty military personnel can place a 12-month alert on their credit record if deployed. If deployed, longer military personnel can request an alert extension.

FACTA says that the term “active duty military consumer” means a consumer in a military service who

(A) is on active duty (as defined in section 101(d)(1) of title 10, United States Code) or is a reservist performing duty under a call or order to active duty under a provision of law referred to in section 101(a)(13) of title 10, United States Code; and

(B) is assigned to service away from the usual duty station of the consumer.

The value of the credit alert system is that it informs creditors that you are active-duty military, a notice can prevent credit damage, identity theft and other credit-related problems.

Third, it’s good to check credit several months before applying for a VA mortgage or looking for a home. The reason? It can take some time to clean up errors, if any are found.

Photo courtesy 401(k) 2013