Credit reports can affect many aspects of our lives, such as buying a car or applying for a mortgage. Lenders use credit reports to determine our credit suitability and financial situation. Despite the importance of credit reports, they are often inaccurate and contain errors.
But exactly how common are credit report errors? Let’s take a close look at the issue and some credit report error statistics.
Why Credit Report Errors Are So Important
Credit reports are compiled by Equifax, Experian, and TransUnion, who account for the major credit bureaus in America. These bureaus collect credit history information from different sources, including banks, credit card companies, and other lenders. They then use this information to create credit reports, including personal data, credit accounts, payment history, and other financial details for consumers all over the United States.
Lenders, landlords, employers, and companies access your credit report and use this information to evaluate your financial stability. This is exactly why a credit report can determine whether or not you get approved for a loan, credit card, etc.
Here are what the statistics say about credit report errors:
Credit Report Error Statistics in America
According to the Federal Trade Commission (FTC), one in five people will have a credit error on their credit report. These errors can be minor mistakes such as misspelling names or addresses, but there are also more serious issues like fraudulent accounts or incorrect payment records. The FTC also found that 5% of people had credit errors, which required them to pay more for loans.
It’s true; the major credit bureaus have files on over 200 million consumers, and the above FTC study suggests that more than 10 million consumers have credit errors in their reports. In short, credit errors affect millions of people in America, and it’s important to remove them before they damage your credit rating.
But you might be wondering, “How can these credit errors happen?” Here’s how:
Why Do Credit Report Errors Happen?
Credit errors are very common, and there are many reasons why they might happen. For instance, creditors often report inaccurate information, such as late or missed payments, to the credit bureaus. Credit bureaus are known to mix up consumer reports, especially when a consumer has a name or social security number that is similar to another consumer. Credit bureaus are also slow to update credit reports, which means they fail to update records regarding your recent address change or recently paid loans. In sum, there are many reasons why credit errors exist, and you should focus on removing them instead of wondering how they got there in the first place.
Once again, these inaccuracies can have serious consequences, so it’s important to remove credit errors to protect your financial well-being. But what credit errors actually exist? Here’s what you need to know about the common types of credit report errors.
What Are Some Common Credit Report Errors You Need to Look Out for?
Credit report errors are surprisingly common, so much so that we find that certain serious mistakes keep popping up on credit reports. These errors can have a significant impact on your credit score and financial well-being, so you should be aware of them and check your credit report for them. Here is a breakdown of the most frequent credit reporting errors you might encounter.
Incorrect Personal Information
Your credit report might contain inaccurate personal details, such as wrong names, addresses, or Social Security numbers. These seemingly minor errors can lead to mix-ups with other people’s credit histories or even indicate potential identity theft. Check your personal information carefully on all three major credit reporting companies’ reports.
Accounts You Don’t Recognize
Sometimes, accounts you never opened appear on your credit report. This could be due to identity theft or a mix-up with someone who has a similar name. If you spot unfamiliar accounts, it’s crucial to dispute them immediately with the credit reporting agencies.
Closed Accounts Reported as Open
Credit reports may show accounts you’ve closed as still open. This error can affect your credit utilization ratio, potentially lowering your credit score. The Federal Trade Commission recommends checking your credit reports carefully for any closed accounts incorrectly listed as active.
Duplicate Accounts
Occasionally, the same account might appear multiple times on your credit report. This can artificially inflate your debt and negatively impact your credit score. If you notice duplicate listings, you’ll need to file a dispute with the credit reporting agencies to have the extra entries removed.
Incorrect Payment Status
Your payment history significantly influences your credit score. Errors in payment status, such as late payments incorrectly reported or on-time payments marked as late, can severely damage your credit. Regular checks of your free credit reports can help you catch and correct these mistakes promptly.
Outdated Information
Negative information should generally fall off your credit report after seven years (ten years for bankruptcies). If you notice outdated negative items lingering on your report, you have the right to request their removal. This process is a huge part of credit repair and maintaining an accurate credit history.
How to Check for Errors on Your Credit Report
You can check your credit report for errors and it’s important to do this on a regular basis. This involves contacting the bureaus to request a copy of your report and then examining these documents closely in order to spot any mistakes or errors. Upon finding any credit errors, you can file a dispute, and the credit bureau is required by law to investigate and respond to your claim within 30 days. But if you don’t have the time or will to do this yourself, a credit lawyer can spot credit errors and file a dispute with the bureau on your behalf.
How a Credit Lawyer Can Help with Credit Errors
If you need assistance or spot any errors on your credit report, hiring a consumer lawyer can help resolve the issue quickly. These attorneys focus on credit-related issues and have experience disputing errors on credit reports. If a dispute is not resolved by the credit bureaus, an attorney can file a lawsuit against the credit bureaus on your behalf and work towards obtaining a settlement.
Final Thoughts
Credit report errors are surprisingly common and can seriously affect your financial well-being. While you can protect yourself by checking your credit report, hiring a credit lawyer is certainly the best way to identify and dispute errors and reach a settlement as quickly as possible.
Need help with errors on your credit report? Get in touch to speak with our team of credit lawyers at McCarthy Law and fix your credit report today!