Your 3-Step Plan to Finding Errors in Your Credit Report

You might be surprised to know that errors in a credit report can and do happen. In fact, a recent study suggested that as many as 1 in 4 people found a discrepancy in their own file, and it isn’t just spelling errors that might be causing damage. Certain kinds of omitted information can be harmful as well, triggering a drop in your credit score and a limited access to future credit.

How can you determine if your credit report is hurting from missing information? What should you do about it?

Caution for Errors in Credit Reports

As many as 1 in 4 people found a discrepancy in their own file. How can you check yours?

Step 1: Get a copy of your credit report     

You won’t get far in determining where your report lacks information without gaining access to it. Americans are entitled to one free annual copy of their credit report (not score) from each of the major credit bureaus, so make sure to take advantage of this opportunity to check for errors.

Step 2: Check for discrepancies

Some of the most common inaccuracies in a credit report involve “tradelines” (i.e. credit accounts, such as a credit card). The issue might involve incorrect information, additional records (not actually belonging to the report owner), or even omission of past financial data. Missing information can be the result of a simple error in your file, or due to a creditor not supplying full information to the credit reporting agencies.

If you do happen to have tradelines that are not reflected in your credit report, it changes the apparent length and diversity of your credit history as well as ignores your performance (payment history) with those omitted accounts. Each of these factors are hugely important to your credit report, since they communicate to financial institutions and lenders just how trustworthy you are with a line of credit.

Therefore, unless your credit record involves a poor repayment history or other negative factors, adding a missing tradeline may indeed help to improve your credit score.

Step 3: Make the correction

The Fair Credit Reporting Act (FCRA) recognizes the possibility of inaccuracies and gives people the right to dispute information that they think may be inaccurate. A credit reporting agency that fields a consumer dispute must investigate free of charge and update the report owner on the results of their findings (either making a correction or providing verification that an item is indeed correct).  If your dispute does result in a change, the agency is required to provide a free copy of your updated report.

John Gower writes for NerdWallet, a website dedicated to helping people learn more about their personal finances and find the best free checking account, high yield savings account, and more.

Photo courtesy twicepix