Credit reports can be the key to unlocking good interest rates on loans and credit cards, but a single error can slam that door shut. According to Leslie H. Tayne, a personal finance expert and attorney, the cost of an error that tanks your score can be substantial, leading to less favourable borrowing terms. For example, losing access to funding or paying thousands more in interest can be detrimental when buying a home or car.
Weeding out mistakes is crucial for financial health. A study by Consumer Reports estimates that 44 per cent of credit reports contain errors. Finding them is just the first step; reporting and resolving them is where the hard work begins. Fixing errors can save consumers thousands in interest payments on future loans and credit cards.
Start by obtaining a copy of your credit report from the three main bureaux: Equifax, Experian and TransUnion. Each report lists open and closed accounts, including lender name, account opening date, balance and payment history. Check each area for mistakes, especially inaccurate late payment information, as one late payment can lower a score by 60 to 110 points, according to The Credit People.
Errors typically arise from four causes: mixed files, outdated information, identity theft or creditor mistakes. Mistakes in names and addresses usually don't affect scores, but payment history errors can be costly. Verify every account and payment history; removing a 90-day late payment could boost a score by over 100 points. Tayne recommends checking reports every three months and filing a dispute with supporting documents if something seems off.
Once an error is found, file a dispute with the credit bureau. Online reports often have a 'Dispute' button. The process generally involves selecting the error, providing an explanation and submitting evidence. Alternatively, mail a dispute using a template from the Consumer Financial Protection Bureau, sending it by certified mail. Bureaux typically have 30 days to investigate and five business days to inform you of the outcome.
