How to Dispute Credit Report Errors

Managing your financial life is tough enough without credit reporting errors setting you back. But mistakes happen. The Federal Trade Commission did a 10-year study and found that 20% of credit reports contained errors and that 25% of those reports had errors big enough to affect their credit score.

That might not seem like a lot, until you do the math. The three major reporting bureaus – Experian, TransUnion and Equifax – each deal with around 200 million files. If 20% of them have errors, that means 40 million files are bad and 10 million are bad enough to damage your credit.

If you’re one of the unfortunate with errors on your credit report, you need the know how to fix them.

Where to start

Begin by being proactive. Bad things can happen when your credit report goes sour. Don’t wait until you’ve been spurned for a mortgage, or a credit card, or even a job. Know where you stand at all times.

You are entitled to a free report each year from each of the Big Three. So, using AnnualCreditReport.com, order them already. Typically, you would want to spread them out and get one every four months, but if you suspect there is an error, you could request all three at once to compare information and see if you can find the error yourself.

You also can score free credit reports if you’re turned down for credit (new credit, or a hike in your credit limit) because of something in your report. Suspect fraud? Placing a fraud alert entitles you to another set of copies.

You typically will find that the reports contain remarkably similar information, so rather than getting three reports in, say, January, and nothing for 12 months, order them in four-month intervals. One in January, another in May, the last in September. Rinse, repeat. Make it a habit, so you’re getting the freshest available free information every four months.

Where to take your claim

Spot something that doesn’t look quite right? Under the Fair Credit Reporting Act, credit reporting agencies such as Experian, Equifax and TransUnion are required to investigate your credit report dispute.

You also can take your complaints to those responsible for supplying information to the credit bureaus: banks, retailers, mortgage companies — in short, anyone who is in the business of granting credit — plus debt collectors.

The scuttlebutt: Experts do not think highly of lenders’ or debt collectors’ investigatory expertise or enthusiasm. This perception might be connected to the limited scope of lenders’ obligations. They need only look at what the consumer owes, whether the account holder keeps payments current, and if they have the consumer’s name right. This limited scope makes their reviews seem to be quick and shallow, with the result that errors sometimes are deemed accurate.

Credit reporting bureaus, on the other hand, also must look into the accuracy of the person’s Social Security number, full name, complete address, and errors in the inquirer’s work history.

To be certain, contact both. That’s the recommendation from the Consumer Financial Protection Bureau.

Targeting the error(s)

Report, or reports, in hand, comb through them for inaccuracies. Keep in mind, identity theft is rampant; you want to nip it in the bud by watching out for:

• Wrong account numbers
• Inaccurate birthdates
• Accounts you don’t recognize, or aren’t yours
• Credit limits or loan balances that seem off
• Inaccurate account status (payments reported late in error, for instance)
• Lingering negative information that ought to have aged out; everything but personal bankruptcy (10 years) should drop off your report after seven years
• Addresses you don’t recognize (a big-league marker for identity theft)
• A former spouse listed on a loan or credit card in error
• You are reported as the owner of an account, when you actually are only an authorized user
• Same debt listed more than once (possibly with different names)
• Inaccurate date of last payment, date account was opened, or date of first delinquency

Now, not every negative notation that comes as a surprise is necessarily inaccurate. Sometimes, in the midst of a move or a personal crisis, we innocently miss a payment, or make them late. If you’ve otherwise been a good client, contact the lender and explain the extenuating circumstances.

If you’ve returned your account to good order, or you have a solid, explainable plan to do so, contact the affected lender(s) and see about expunging the late payment episodes from your reports. Sometimes getting your credit report back on track is just that simple.

Again, if you detect accounts you don’t recognize, or see addresses listed where you’ve never lived, act swiftly. These are signs of fraud; you might want to consider applying a credit freeze. These days, each of the Big Three will perform the service free of charge.

Error(s) Detected — Now What?

Alas, your good word isn’t good enough on its own. You will need the best available evidence. Been divorced five years, but your ex is still on your report? Present a copy of your divorce decree.

Payments made on time were recorded as late? Bank statements are your friend.

In short, you need documentation. Whatever is relevant applies: Loan documents, credit card statements, marriage licenses, divorce decrees, birth or death records, bank statements.

Investigators will be delighted to have help. Demonstrate that you are organized, reliable, and circumspect. Help them help you. You’ve spotted an error, and you can back up your claim with the hard evidence of a paper trail (even if it’s entirely digital).

» Learn More: How to Dispute a Credit Card Charge

Initiating Your Dispute

You will not be astonished to discover each of the Big Three has an online error-disputing process. Generally, that’s the most efficient way to resolve a problem.

However, you also may begin with a telephone call or a letter. Indeed, experts recommend dispute-by-letter, because you are fully in command of the message, not the reporting bureau’s template.

In your letter (Sample Credit Report Dispute Letter), you will detail your complaint, describing why the information in the report is erroneous. You also will provide evidence that proves the inaccuracy.

It sounds old-fashioned — and it is — but the letter strategy has the advantage of being complete; the credit bureau will have a tough time claiming they lacked the information to corroborate your dispute.

Send a copy of everything to the creditor whose record you’re disputing, so it, too, will not be able to claim it lacked a complete record.

Of course, you’ll want to keep a copy of your correspondence for your files.

Whatever process you prefer — internet, phone, or mail — prepare to be thorough. Creditors and the reporting bureaus have layers of safeguards in place to make certain they get their data right.

Things may swing slightly in favor of consumers in the wake of robo-foreclosures during the Great Recession and, more recently, Wells Fargo’s naughtiness, but you still need to be ready with details:

• Your full and complete name, including generational suffixes.
• Your Social Security number (innocently transposed numbers constitute a significant portion of reporting errors).
• A copy of a government-issued identification document, such as a driver’s license, state-issued ID card, or passport.
• Current address, and past addresses tracing back two years.
• Copies of utility bills, bank statements, or insurance policies showing your name and address.
• A list of the items on your report you are disputing, why you believe they are in error, and your supporting evidence.

Once you’ve filed your dispute, the credit bureau has, generally, 30 days to investigate and certify information with the creditor. The reporting agency must present its findings to you within five days of completing its investigation.

The creditor — sometimes called the furnisher — also must abide by the 30-day constraint. Know this: There will be no change in its report if it stands by the accuracy of its original report.

Either way, review the reports from the credit bureau and/or the furnisher. If you are unhappy with either’s finding, you can request having a statement attached to your report explaining the dispute.

If your challenge is successful, that’s not the end of it. Keep an eye on whether your credit report has been updated. It may take a while, depending on the bureau’s update cycle. Follow up if you’ve seen no change after about three months.

A Slice of Useful History: You’re Not in This Alone

Errors on credit reports are, unfortunately, nothing new. A 2012 Federal Trade Commission study unearthed an alarming number of “material” mistakes — that is, an error with the potential to lower a credit score. More than a quarter of 1,001 people who reviewed their credit reports identified mistakes ranging from credit card accounts that weren’t theirs to a disputable late-payment charge.

OK, it’s one thing to claim an error. The proof in the pudding is whether they stick. So: Nearly 80 percent of those whose claimed errors were presented to the Big Three credit bureaus — Experian, Equifax, or TransUnion — saw at least one change in their credit reports.

What this means to you: There’s about a one-in-five chance your credit report is being weighed down by inaccurate data. Wait. This also means there’s a four-in-five chance your report is error-free. Those are pretty good odds, right?

The question is: Are you willing to assume the risk to your credit health that ignoring your credit report implies?

Hint: Because your credit report can be instrumental in obtaining a credit card, increasing your debt limit, securing a loan with the best possible terms, or even getting a job, the correct answer is, “Absolutely not!”

As mentioned above, credit report errors often happen when Social Security numbers get transposed on an application, or someone with the same name in a similar ZIP code applies for credit.

Of course, there’s always the risk of identity theft. And, as happens from time to time, you might get dinged for an unpaid medical bill an insurer was supposed to pay. More errors happen when people change their names, especially through marriage or divorce.

In short, the credit-reporting waters are sometimes murky. Let us reiterate: It’s a good idea to peer through the gunk of each bureau’s report at least once a year.

Luckily, the landscape has changed, and, under pressure from the public amplified by Congress, the Big Three began rolling out friendlier terms last summer under their joint National Consumer Assistance Plan. This one is big: Consumers will receive improved communication about their disputes and options until their issues are resolved.

A word of caution: Just don’t be silly about this. Furnishers and credit reporting bureaus can spot a frivolous complaint a mile off, and they won’t forget if you come back next year with a substantial, verifiable dispute.