- 10-Jan-2025
- Family Law Guides
Credit reports are critical documents that reflect a consumer’s financial history and are used by lenders to assess creditworthiness. Unfortunately, errors can occur on credit reports, and they are more common than many people realize. Mistakes on your credit report can negatively impact your credit score and may lead to denied credit applications, higher interest rates, or even issues with housing or employment.
What It Is: This can include incorrect details such as your name, address, Social Security number, phone number, or date of birth.
How It Affects You: Incorrect personal information can confuse creditors and even lead to mistaken identity issues or fraud. If lenders cannot verify your personal details, they might not approve credit applications or could mistakenly report data under the wrong person’s name.
Example: Your credit report might show an old address or misspell your name, which could cause a mismatch during credit inquiries.
What It Is: This occurs when accounts that are not yours (e.g., accounts from someone with a similar name or address) are incorrectly listed on your credit report. This can happen due to clerical errors or identity theft.
How It Affects You: Having mistaken accounts on your credit report can lower your credit score and prevent you from qualifying for new credit. If someone else's late payments or defaults are reported on your credit file, this could negatively impact your creditworthiness.
Example: A credit card account or loan that doesn’t belong to you shows up on your report, potentially hurting your score.
What It Is: An account may be reported as open or active when it has been paid off or closed, or a payment may be marked as late when it was actually made on time.
How It Affects You: If accounts are listed as open when they should be closed, or if on-time payments are incorrectly marked as late, this can harm your credit score and make it appear as though you are a higher credit risk.
Example: You paid off a car loan early, but your credit report shows that the account is still open and reflects late payments.
What It Is: Sometimes, the same account can appear multiple times on a credit report, especially if the account was transferred or sold to a different creditor.
How It Affects You: Duplicate accounts can artificially inflate your debt load and negatively impact your credit score. Lenders may think you owe more than you actually do if multiple accounts are listed for the same debt.
Example: A car loan that was sold to a new lender might appear twice, once under the original lender and once under the new one.
What It Is: Negative information, such as late payments, collections, bankruptcies, or foreclosures, should only stay on your credit report for a certain period (usually 7 years for most information, 10 years for bankruptcies). If old negative information is still on your report after it should have been removed, this is an error.
How It Affects You: Outdated negative information can significantly drag down your credit score and make it harder to obtain new credit.
Example: A collection account that was settled more than 7 years ago still appears on your credit report, affecting your credit score.
What It Is: Sometimes, the credit limit or balance on a credit card or loan may be reported incorrectly on your credit report. This could either be an overstatement or understatement of your available credit.
How It Affects You: If your available credit is reported incorrectly, it can affect your credit utilization ratio (the amount of credit you're using compared to your available credit), which is a significant factor in your credit score.
Example: Your credit card company reports a $2,000 credit limit when your actual limit is $3,000, which could make your credit utilization appear higher than it is.
What It Is: If someone gains access to your personal information, they may open new accounts in your name or make unauthorized purchases. These fraudulent accounts will appear on your credit report, often showing missed payments or high balances.
How It Affects You: Fraudulent accounts can seriously damage your credit score, as they often reflect late payments or high debt that you did not incur. If you don’t catch it quickly, it can take time to resolve.
Example: An identity thief opens a new credit card in your name and racks up significant charges, leading to missed payments and a damaged credit score.
What It Is: Public records like bankruptcies, judgments, and tax liens are part of your credit report. Sometimes, public record information is reported inaccurately or is outdated.
How It Affects You: If a public record shows up on your credit report that doesn’t belong to you or is outdated, it can seriously affect your ability to get credit.
Example: A bankruptcy that was discharged years ago is still appearing as active on your credit report.
What It Is: When a potential lender checks your credit report (a hard inquiry), it should be listed on your credit report. Sometimes, credit inquiries are either not reported or incorrectly marked.
How It Affects You: Missing credit inquiries could impact your credit score, especially if a lender thinks that your credit history was not properly reviewed. Likewise, too many credit inquiries in a short time can lower your score.
Example: You applied for a car loan, and the lender pulled your credit, but it doesn’t show up on your report.
You are entitled to a free credit report from each of the three credit bureaus once a year through AnnualCreditReport.com. Regularly reviewing your credit reports can help you spot errors early.
If you find an error, you can dispute it directly with the credit bureaus. Each bureau allows you to file a dispute online, by mail, or over the phone. The bureau will investigate the issue and correct any inaccuracies if they are found to be valid.
When disputing an error, provide as much evidence as possible. For example, if you’re disputing an incorrect payment history, you might provide bank statements, receipts, or correspondence with your lender to back up your claim.
If you believe you are a victim of identity theft, place a fraud alert or credit freeze on your credit file, and report the fraud to the credit bureaus. You may also want to consider subscribing to a credit monitoring service.
Sarah noticed that her credit report included a credit card account she had never opened. After reviewing the report, she realized the account was the result of identity theft. She immediately disputed the account with the credit bureau and contacted the creditor. After submitting proof of identity theft, the account was removed, and her credit report was corrected.
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