Many television commercials urge consumers to order free copies of their credit reports. The Federal Trade Commission warns that most of those offers have purchase or membership requirements, although genuine free reports are available annually through an official federal website. This access lets people find out if their credit reports are wrong in any way so they can fix the mistakes.
Incidence
Inaccurate credit reports are common. Bob Sullivan, an MSNBC Red Tape Chronicles columnist, states that credit bureaus estimate only 3 percent of reports have mistakes, which would stlll affect 6 million people. He explains that the Federal Trade Commission pegs the number as high as 16 percent, with third parties estimating that 25 percent of all reports contain potentially harmful errors.
Types
Some errors do not affect credit reports but many bring down a person's credit rating. Dayana Yochim, a writer for the Motley Fool financial website, advises that payment dates are the most common problem area, with on-time payments showing up as up to 90 days late. This seriously impacts credit, according to FICO, a major credit score compiler, because payment history has the most weight in score calculation. Other issues include out-of-date demographic or employment information and old accounts that were settled but that are still showing up as open and past due.
Effects
Negative credit report mistakes can affect a person's finances and ability to get employment. The Federal Reserve Bank of San Francisco explains that lenders and employers review credit reports when reviewing credit card and loan applications or screening job applications. They base their decisions on information contained in the reports. If something incorrect in the file makes the person look fiscally irresponsible, it can cause denial of the application.
Considerations
The credit bureaus do not review credit reports for accuracy, so the Fair Credit Reporting Act makes free copies available to consumers every year. Experian, Equifax and TransUnion each provide one free report per person every 12 months if it is requested through the official website, annualcreditreport.com. They also sell reports on their own websites. People can comb through their reports for mistakes, and the FCRA allows them to challenge anything they find. The law forces the credit bureaus to remove disputed information that cannot be properly verified by lenders.
Solution
The dispute process is the solution to erroneous credit report items. The FTC explains that consumers simply need to write letters to each credit bureau stating the reason for each dispute. Enclose documents like statements, receipts or copies of checks to back up the challenge whenever possible. Mail the letters through the post office and request dated delivery receipts. The credit bureaus each have 30 days to contact the lenders related to the disputed items and get verification of accuracy. The items are erased if no proof is provided or if the lenders totally ignore the requests. The bureaus mail out corrected report copies so consumers can see the end result.
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