How Accurate Is a Credit Report?

The Fair Credit Reporting Act requires credit reporting companies to adhere to strict privacy and accuracy rules. However, people make mistakes --- and due to mistakes or identity theft, inaccurate information may slip into your credit report. The best way to keep your credit report accurate is to monitor it yearly, and protect your lines of credit from identity theft.

Definition

A credit report lists more than just your credit card history. It includes your address and previous addresses, every active and inactive bank account in your name, your bill payment history, whether you've been arrested or sued and if you've filed for bankruptcy. The information on your credit report also determines your credit score, between 300 and 850, which provides a snapshot of your creditworthiness (higher is better). When you apply for credit, potential lenders look at your credit report to determine whether you will be a responsible candidate for credit.

Significance

A credit report, while it is an important tool that potential lenders use to make decisions, is not the be-all, end-all. Credit reporting companies make mistakes, too, and unless you regularly monitor your credit report, there's no knowing how accurate your report is. Fortunately, the law allows you one free copy of your credit report annually, which you should use to your advantage and peruse your report for any errors.

Obtaining Your Report

There is only one website from which you can obtain a truly free copy of your report, which is annualcreditreport.com. Plenty of other websites advertise free credit reports, but they may require you to subscribe to their services to obtain your report. You may also obtain your report by calling 877-322-8228, or complete the Annual Credit Report Request Form in "Resources" and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA, 30348-5281.

Solutions

Some negative information may stay on your credit report long after you've amended irresponsible behaviors. If your credit report is technically accurate but you have become more responsible, you aren't out of options. You can take out a secured loan to rebuild your credit report, or work with a credit counseling agency to pay down existing debt. If you are a victim of identity theft, call your credit issuer immediately. Once you have reported the theft, you are not responsible for any charges made to your account. By law, your maximum liability for unauthorized charges is $50 per account.

Disputing Inaccuracies

It's your responsibility to dispute errors on your credit report. If you don't, you may hurt your chance of obtaining new credit. Start composing a dispute letter by writing down what you believe is wrong (you can include multiple errors in the same letter). Follow this with an explanation of why the information should be removed, and a statement requesting the company to remove this information off your report. Make copies of any important documents that support your claim, and include them with your letter. Don't mail originals. Provide your name, address and a list of your enclosed documents. If you need additional help, the Federal Trade Commission offers free information about disputes and credit problems. To contact the FTC, call 877-FTC-HELP.