Are you one of the 35 percent of Americans who has never checked his or her credit report? If so, you could be missing a costly error.
A 2012 Federal Trade Commission (FTC) report discovered that about one in four Americans found at least one potentially significant error on at least one of their credit reports. While credit report errors aren't uncommon, what's most important is that you have a right to dispute the inaccurate information. Here are some important steps to consider when filing a dispute.
Step 1: Learn how to spot an error and what it could mean.
What is an error?
Simply put, an error is information on your credit report that shouldn't be there. This could be because it isn't yours, it's incorrectly reported or it's against the law to be listed. Common credit report errors can include:
- Account-Related Errors
- A late payment that's more than seven years old
- Having a credit card or loan account listed that doesn't belong to you (or that you're not a co-signer or an authorized user on)
- An account was closed by you, but it's listed as closed by the provider
- Derogatory Mark Errors
- A paid-off collections account is still showing as unpaid
- A paid tax lien that is more than seven years past the date of payment
- An account that was discharged in bankruptcy is still showing up as active with a balance (account history can still be reported)
- Personal Information Errors
- Wrong name listed
- Addresses you've never lived at or used as a mailing address
- Inaccurate employer information
*If your credit report is missing information, that doesn't necessarily mean there's an error because your information doesn't necessarily have to be reported to all of the credit bureaus or the latest changes to your credit haven't been reflected in your report yet due to normal processing times.
What effect can an error have?
Account-related and derogatory mark errors could affect your credit score, which could then affect whether you'll qualify for a financial product such as a credit card or loan and what terms you can get. Personal information errors typically don't affect your credit score, but they could alert you to a reporting issue -- or even fraud.
Step 2: Review your credit reports.
How are credit reports created?
Certain companies, including credit card issuers, loan providers and debt collection agencies, may choose to report your information to one or more credit bureaus. Credit bureaus collect that information and may also seek out court or other public records to put together the information that can be shown on your credit report.
The three national credit bureaus (Equifax, Experian and TransUnion) can then share your credit report with you and with people or companies who have a legal reason to ask for it. Credit bureaus and data furnishers are subject to regulations, such as the Fair Credit Reporting Act, to ensure the data on your credit report is accurate.
How do you get your credit reports?
You are entitled to receive one free copy of your credit report from each of the three national credit bureaus each year at AnnualCreditReport.com. If you've already used up your free reports for the year, you can still gain access to them directly through the credit bureaus, but you'll likely have to pay a fee. You can also view your Equifax and TransUnion credit reports for free anytime through Credit Karma.
You may also be able to access an additional free report for the following reasons:
- You're denied credit because of information on your credit report.
- You're not working and want to apply for a job in the next 60 days.
- You receive public welfare assistance.
- You believe your report contains inaccurate information because of identity theft.
Once you have your reports, you should review them for errors. In some cases, an error may not be reflected on your reports from all three credit bureaus, so make sure to check each credit report carefully.
Step 3: Notice an error? Determine what you should do next.
You found an error on your credit report. What you do next may depend on the type of error. Is there an account or late payment that shouldn't be there? Have you talked about it with your credit card company or loan provider? If the error is easy to resolve by contacting your creditor directly, that might be all that's needed. If not, you can file a dispute.
If you're a Credit Karma member, you can dispute an error on your TransUnion credit report through our Direct Dispute™ tool. Here are instructions on how to do that.
You can also dispute incorrect information with each credit bureau or directly with the data furnisher, or the company that provided the information to the bureau. Here are some pros and cons to weigh when considering either option.
Dispute Filed With
You can file a dispute online through the Equifax, Experian and TransUnion websites. There's also a definitive list of contact information for each bureau. You can call to start a dispute over the phone or you can mail in your documents to the relevant address.
Add Statement to Your Credit File
If your dispute isn't resolved in a way you're satisfied with, you can request that a short statement of your dispute be included in your credit file and future reports. You can even ask the bureau to send that statement to anyone who received a copy of your report in the recent past (there's typically a fee for this service).
Public Record Information
Credit bureaus may collect public record information from a variety of sources to show information related to bankruptcies, civil judgments and tax liens on your credit report. If there's an error related to one of those items, it may not be as simple to go to the source and may be easier to file a dispute with the credit bureau.
Potential Middle Man
For many types of disputes, the credit bureaus will likely need to reach out to the data furnisher to verify the information that is being disputed. Another option would be to contact the data furnisher directly.
If the information you're disputing needs to be checked by contacting the data furnisher, then reaching out to the credit bureau could delay the process. The bureau would contact the data furnisher then the data furnisher would respond back to the bureau. The additional steps could delay the dispute review.
If the error is related to account ownership, payment history or other account details, this could be resolved through the data furnisher's review. If you contact them first, you can potentially avoid the dispute process or at least skip waiting for the credit bureaus to contact your data furnisher.
Fewer Ways to File a Dispute
Many data furnishers will only accept a dispute that's sent by mail.
Some Disputes Don't Have To Be Investigated
There are some types of disputes that data furnishers don't have to investigate if a dispute is filed directly with them including disputes related to personal information (such as your name, address, SSN, employment information) or inquiries made about your credit.
You could dispute with both the credit bureau and data furnisher, which could speed up the process. Also, if you're unsure of which method to use, filing a dispute online usually requires less documentation since your account information is more accessible.
Step 4: Follow up on your dispute.
When will my dispute be resolved?
The credit bureau and data furnisher are generally required to investigate your dispute within 30 to 45 days of receiving notification of the dispute and should notify you of the result.
"With the credit bureaus, about 70 percent of disputes are resolved within 14 days," says Norm Magnuson, vice president of public affairs at the Consumer Data Industry Association (CDIA).
How are disputes handled?
You filed your dispute with the credit bureau
If the error is related to your personal information, public records or inquiries, credit bureaus can look into the issue themselves. About 15 percent of the time, the credit bureau doesn't need to involve the data furnisher, Magnuson says. Otherwise, the bureau will send information about the potential inaccuracy to the data furnisher, or the company that provided the information, such as your credit card issuer or mortgage lender. The data furnisher will investigate the dispute and report back to the credit bureau. If your credit report is requested while a dispute is happening, the information involved in the dispute should be marked to reflect that.
You filed your dispute with the data furnisher
The data furnisher will investigate the dispute and report back to you. If your credit report is requested while a dispute is happening, the information involved in the dispute should be marked to reflect that when the furnisher sends their reporting updates to the bureaus.
What happens if your dispute results in a change?
Regardless of who you filed your dispute with, if the data furnisher is involved, they must update their records and notify the credit bureau of the change.
If you filed your dispute with the credit bureau, they have to include a free copy of your credit report if it was changed because of an investigation. Also, at your request, the credit bureau can send notices of corrections made to your credit report to anyone who received it in the last six months (two years for your places of employment).
What if you disagree with the result?
Once there's a decision on your dispute, you may agree or disagree with the result. If you disagree, there are more steps you can take.
It's important to dispute incorrect information on your credit report because it may have a significant impact on your credit health and financial future. In some cases, it's also one of the quickest ways to make an impact on your credit score. You can detect errors and address them faster by keeping an eye on your credit with Credit Karma.
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