Errors on a credit report can severely damage a credit score and make borrowing more expensive. Regularly checking your credit report can help you spot mistakes early and take action. According to a study by Consumer Reports, an estimated 44 percent of credit reports contain errors, which can lead to higher interest rates or even denial of credit. Leslie H. Tayne, a personal finance expert and attorney at Tayne Law Group, emphasises that 'the cost of having an error on your credit report that is actually tanking your score can be substantial, as it leads to less favorable terms when borrowing.' Fixing these errors can save consumers thousands of pounds in interest payments over time.
Step 1: Obtain Your Credit Reports
Getting copies of your credit reports from the three main credit bureaus—Equifax, Experian, and TransUnion—is the first step. Services like FreeCreditReport.com provide access to these reports. Each report lists all open and closed credit accounts, including credit cards, personal loans, auto loans, mortgages, student loans, and store credit cards. For each account, check the lender's name, account opening date, balance, and payment history. The most costly error is inaccurate late payment information. A single late payment can lower a credit score by 60 to 110 points, according to The Credit People. Payment history is the most important factor in credit scores, so fixing payment errors can have a significant impact. Errors typically arise from user mistakes, lender errors, collections agency errors, or processing inaccuracies. Mistakes in names and addresses usually do not affect scores, says Atoine Sallis, CEO of Credit Genius.
Step 2: Identify and Verify Errors
Carefully review each account on your credit report. Verify that all accounts belong to you or that you were added as an authorised user or co-signer. Pay close attention to payment histories; payments over 30 days late can drop scores by over 100 points, but removing such errors can boost scores similarly. 'Check it line by line for any inaccuracies,' advises Tayne. 'If something seems off or unfamiliar, do your research to confirm whether it’s legitimate. If it isn’t, file a dispute with the credit bureau and include any supporting documents.' To stay ahead of new errors, Tayne recommends checking credit reports every three months. If your credit score drops unexpectedly despite on-time payments, look for newly reported incorrect late payments.
Step 3: File a Dispute
Once an error is found, file a dispute with the credit bureau. Online reports typically have a 'Dispute' button for each account. The process generally involves clicking the dispute button, selecting the account with the error, identifying the error type (e.g., account not belonging to you or inaccurate information), explaining the error, and submitting the dispute. Alternatively, you can mail a dispute using a template from the Consumer Financial Protection Bureau, sending it by certified mail to prove receipt. Credit bureaus have 30 days to investigate and five additional business days to report findings, though this may extend if more information is needed. Tayne suggests following up with the bureau a week or two after filing to track progress. Resolving errors can significantly improve your credit score and financial health.
