For those unaware, your credit report is a snapshot of your entire credit history -- that is, all of the credit cards and loans in your name, along with details on payment history, previous judgments, and bankruptcies. Having a good credit report is as essential to securing a loan as having a good resume is for securing a job. If your report contains a bunch of red flags, lenders may think twice about giving you money in case they don't get it back.
But what if those red flags don't rightfully belong to you? If you don't know they're there, you could end up being penalized for financial mistakes you didn't make.
Fortunately, when something is a genuine error, you can get it fixed. Here's a short guide on how to check your credit reports, what errors to look out for, and what to do if you find them.
Image source: Getty Images.
How to check your credit reports
Everyone is entitled to one free credit report per bureau per year through AnnualCreditReport.com. Just create an account on the site and answer a few identity verification questions, and you'll be presented with your credit reports.
You have three -- one for each of the three credit bureaus: Equifax, Experian, and TransUnion. You can choose to look at them all at once or space them out throughout the year. However, it's important to keep an eye on all of them, as they may contain slightly different information. An error may only show up on one report.
You also can get your credit reports directly from the credit bureaus themselves or through some credit monitoring services, but you usually must pay for these.
Common mistakes found on credit reports
Here are some of the most common mistakes found in credit reports:
- Incorrect personal information: If the report lists the wrong address or the wrong middle initial, that could be a sign that the credit bureau has confused you with someone else who has a similar name.
- Accounts not belonging to you: If you see a credit card or loan on your account that you don't remember opening, your identity may have been stolen.
- Closed accounts reported as open: Having old debts on your credit report that you've already paid off can raise your credit utilization ratio and lower your credit score.
- Duplicate accounts: Duplicate accounts also can raise your credit utilization ratio.
- Inaccurate payment history: Make sure your report doesn't list any late or missed payments if you know you've paid on time. This can lower your credit score significantly.
- Outdated balance or credit limit information: Your credit utilization ratio is a measure of how much credit you're using versus how much is available to you. If the credit bureau doesn't have the most accurate information on how much you owe and what your credit lines are, your credit utilization ratio could appear to be much higher than it actually is.
What to do if you find mistakes on your credit report
If you find errors in your credit report, the first step is to notify the credit bureau of the mistake. Your credit report should contain instructions on how you can reach them. You can dispute credit report errors online or by phone, but it's best to do it in writing.
Explain what the error is and why it's incorrect. It helps if you can include information that backs up your claim. For example, if your report is showing a closed loan account as open, send the bureau a copy of the notice showing that you've paid off the debt. Then, request that the mistake be fixed.
You should include your contact information, as well, in case the credit bureau has any questions for you. Then, send the letter by certified mail so that you can get a receipt when the bureau has received it.
You also can reach out to the financial institution associated with the account. If the issue is with one of your credit cards, contact the card issuer and request that it provide accurate information to the credit bureau. Send the company a letter similar to the one you sent the credit bureaus.
If the mistakes you find on your report lead you to believe that you've been a victim of identity fraud, you should also place a fraud alert on your account. You can do this by contacting the credit bureaus and requesting that a fraud alert be placed on your account.
The initial alert will last for 90 days. If anyone applies for new credit under your name during that time period, the alert will notify lenders that they must take additional steps to verify your identity before approving the request. When the initial 90 days are up, you can choose to extend the fraud alert if the matter has not been resolved.
Once you've submitted your requests to the credit bureaus, they will investigate your claim, which may include contacting the financial institution associated with the erroneous information or account. They will then report back to you with their findings.
In many cases, they will fix the mistakes, but they can also choose not to investigate your claim if they determine it to be frivolous, provided they notify you of this in writing within five days of receiving your claim. However, this is unlikely -- unless you're disputing a large number of errors or you continue to dispute items that have already been investigated in the past.
Checking your credit reports regularly and ensuring that the information they contain is accurate is one of the most important things you can do for your financial well-being. Small errors may not seem like much to you, but they could be a determining factor the next time you apply for a loan, so it's important to get them corrected as soon as possible.
