One of the reasons it is important to review your free annual credit report regularly is because there may be errors in it, which could be the cause of your low credit score. According to the Consumer Federation of America (CFA) and the National Credit Reporting Association (NCRA), the possibility that inaccuracies in credit reports will result in loan denials or higher borrowing costs is a matter of concern.
A study conducted by the U.S. Public Interest Research Groups (PIRGs) in 1998 showed that 29% of credit reports studied contained serious errors that could result in the consumer’s being denied credit, and a total of 70% contained either serious mistakes or errors of some kind. These serious errors included false delinquencies or accounts that did not belong to the consumer. The organization conducted another similar study in 2004 and found that 25% contained serious mistakes and 79% contained errors of some kind. As times get harder and cases of fraud rise, it is possible that your credit report may have an error too.
To ensure that your credit report is free of mistakes, here’s what you should do:
1. Get a copy of your free annual credit reports and review them. You can get your free credit report from www.annualcreditreport.com. By law, you can get a free copy from each of the three credit reporting agencies once every 12 months. You have the option to get all three reports at the same time or one at a time, separated by a few months.
2. Go over each report and scrutinize it for the following: information that does not belong to you, accounts or delinquencies that are not yours, hard credit inquiries that you did not authorize, and negative items that are older than seven years and by now should have been dropped from your credit report.
3. If you find any errors, take the following steps:
- Write a letter to the credit reporting agency where you got your credit report from. To this letter, attach a copy of your credit report where you have encircled the items you are disputing, as well as copies of documents that support your claim. You must provide your complete name and address in the letter. List down each item that you are disputing, explain why you are disputing each, and request that the agency have it corrected. Send the documents by certified mail with “return receipt requested” so that you have a record of what the credit agency received. Make sure that you make a copy of all the documents before you send them.
- Write a similar letter to the creditor or information provider that gave the erroneous information and inform them that you are disputing the item. Attach a copy of your credit report with the items in dispute encircled, as well as copies of your supporting documents. As in the first letter, send this package via certified mail, “return receipt requested”.
4. What happens next:
- The credit reporting agency should investigate the item/s you are disputing within 30 days, unless they consider your claim frivolous. They will send a copy of the data you have provided to the information provider.
- When the information provider receives the notice of dispute from the credit reporting agency, it must investigate the item/s in dispute, review the information, and report its results back to the agency. If it finds that the information in your credit report is indeed inaccurate, it must notify all three major credit reporting agencies so that they can correct the information in your credit report.
- Once the investigation is complete, the credit reporting agency must notify you in writing of the results and, if the dispute resulted in a change in the information on your credit report, it must provide you with a free copy of your report. This is apart from the annual credit report you can get for free once a year from the agency. Note that an item that is changed or deleted cannot be reinstated in your report unless the information provider verifies that it is accurate and complete.
5. At your request, the credit reporting agency will send a notice of the corrections on your credit report to any party that received the report within the last six months. You can also have a corrected copy sent to any party that requested your report within the last two years for employment purposes.
6. If the results of the investigation doesn’t resolve your dispute, you can have a statement of the dispute placed on your file and in future reports. You may also ask the credit reporting agency to furnish that statement to anyone who received a copy of your credit report in the recent past. For this last service you may be required to pay a fee.
Reviewing your free annual credit report is important to protect yourself from identity theft, but more importantly, to protect your credit score from sliding down because of inaccurate information. In addition to taking proactive steps to minimize your debt and expenses to raise your score, your vigilance on watching over the accuracy of the information reported is key.
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