One in five people have at least one error on their credit report, according to a study from the Federal Trade Commission, which could lead to potentially lower credit scores and hurt a consumer's ability to qualify for certain loans or open new lines of credit.
And an inability to access credit, or higher interest rates on products like credit cards or a mortgage, means that those mistakes are costing you money.
To make sure that your report is in good standing, follow these three steps.
1. Review your credit reports
There are three main credit bureaus that you'll want to pull your credit report from: Equifax, Experian and TransUnion. Consumers can get a free copy of their credit report from each of these agencies each year at AnnualCreditReport.com.
Different creditors report to different agencies, so these reports will likely vary — but that doesn't mean they are necessarily incorrect. What you'll want to look for are accounts or loans reported that don't belong to you. The Consumer Financial Protection Bureau offers a list of common credit report mistakes to look for, including:
- The wrong name, phone number or personal address
- Accounts that belong to someone with the same or a similar name to you, but aren't yours
- Accounts opened under your name by someone who stole your identity
- Closed accounts reported as still open
- Late payments that you made on time
- Incorrect balances or limits listed for accounts
- Same debt listed multiple times
If you see an error, highlight it and double check your own accounts to make sure it shouldn't be there.
2. Dispute the errors
If you've discovered an error, you'll want to dispute it with the credit agency that reported it.
"You should explain in writing what you think is wrong, why and include copies of documents that support your dispute," suggests the CFPB, which provides instructions and a template letter. In your written dispute, be sure to include:
- Your name and contact information
- What the mistake is, including any relevant information, such as the account number related to the error
- A request that the error be removed or corrected
- A copy of your credit report with the mistake highlighted
You should also be prepared to give the agencies your Social Security number and other proof of identification.
Here's how to contact each of the big three credit reporting companies online:
You may also want to dispute the error with the company that reported the account to the credit bureaus; that could be a bank, a credit card company, your landlord, etc. If you do that, you'll want to include the same information noted above. The CFPB provides further instructions for exactly what to write.
3. Keep a paper trail
After you've disputed the mistakes, keep a record of what you sent to the agency or creditor, who you spoke to and any other relevant information. If you send a letter to the credit agency disputing something, send it via certified mail, the CFPB recommends.
Credit agencies are required to investigate each error claim and must update you with what course of action they decides to take, typically within 30 days. If you report the error to a company, such as your bank, and they determine it was indeed a mistake, they must notify the credit bureaus to have it removed from your reports.
Finally, make a reminder to check your reports again a year from now. It pays to catch any mistakes as soon as they happen.
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