Shocking Rise in Credit Report Mistakes in 2020 -- Was Your Credit Score Hit?

Credit report errors skyrocketed last year. And that's bad news for consumers.

Your credit report says a lot about you. It lists your open accounts, your various balances, and the extent to which you're using your available credit. As such, it's important that the information on your credit report be as accurate as possible. Unfortunately, that's not always the case.

The U.S. Public Interest Research Group, a consumer advocacy organization, did a recent review of consumer complaints related to credit reports. It found that the Consumer Financial Protection Bureau (CFPB) received way more error notices in 2020 than it did in 2019. In fact, in every month in 2020, there was a higher number of credit report mistakes than there was that same month the previous year.

Beginning in April, credit report errors were up 50% or more on a monthly basis. And in December, errors rose by 124% compared to the December prior.

All told, there were over 444,000 credit report error complaints filed in 2020, compared to 277,000 in 2019. That's an increase of over 60% -- and it's a reminder that consumers need to stay vigilant about their credit reports.

Why so many errors?

Clearly, 2020 was a rough year for a lot of people financially -- and credit report errors certainly didn't help things. So why was there such a large uptick in credit reporting mistakes? A big reason has to do with the relief measures that were put into place during the pandemic.

The CARES Act, for example, gave mortgage borrowers the option to put their home loans into forbearance. Borrowers in forbearance could skip their monthly payments without being reported as delinquent or late on their debts. But even though the CFPB instructed mortgage lenders to count borrowers in forbearance as current on their loans, many mistakenly reported those borrowers as late to the credit bureaus.

The same may have happened with auto loan servicers and credit card companies that allowed consumers to pause payments. To be clear, this incorrect reporting was largely unintentional. Early on in the pandemic, a lot of loan servicers were scrambling to keep up with customer service requests and things may have slipped through the cracks on the reporting front. But the end result was that many consumers saw negative information hit their credit reports in the course of 2020.

Why credit reports matter

As a consumer, you actually have three separate credit reports -- one from each of the three major credit bureaus (Experian, Equifax, and TransUnion). Much of the time, you'll see that your three different reports match up, but it's also possible for them to contain separate information -- especially if one logs an error and the other two don't.

So why are credit report errors a big deal? Your credit reports list your outstanding loans and payment history. Negative information on your credit reports translates into a lower credit score, which makes it harder to borrow money when you need to.

It's also common practice to have your credit report pulled when you're applying to get a mortgage, rent an apartment, or sign up for another loan. If there's negative information on your credit report, you may be denied.

How to check your credit reports and address errors

Under normal circumstances, you're entitled to a free copy of your credit report every year from each reporting bureau. Because of the pandemic, however, you're entitled to free weekly credit reports. You can visit each credit bureau's website and request a free copy of your report there. Or, you can go to annualcreditreport.com to get a copy of all three reports.

If you spot an error on one of your credit reports, contact the bureau in question in writing and let them know. If you have supporting documentation, you can include it.

Credit bureaus must investigate any error reports they receive, usually within 30 days. Once that time period has passed, you should receive the results of that investigation in writing. You should also be eligible for a free copy of your updated report if the resolved dispute results in a change to the information being reported. Plus, you'll have the right to have the bureau in question send notices of any corrections to anyone who requested your report over the past six months, like a landlord or mortgage lender.

Remember, credit report errors aren't specific to 2020 and pandemic-related relief programs -- they can happen all the time. Aim to check your credit report a few times a year, and if you spot mistakes that work against you, be sure to follow up. The last thing you need is to be denied a loan or opportunity because of an error on somebody else's part.