Credit reports are essential for securing favourable interest rates on loans and credit cards, but errors can be costly. According to a study by Consumer Reports, 44 per cent of credit reports contain mistakes. Leslie H. Tayne, a personal finance expert and attorney at Tayne Law Group, warns that errors can lead to less favourable borrowing terms, potentially costing thousands of pounds in extra interest.
The first step is obtaining your credit report from one of the three main bureaus: Equifax, Experian, and TransUnion. Each report lists open and closed accounts, including lender names, account opening dates, balances, and payment histories. The most damaging errors are inaccurate late payments. A single late payment can lower a credit score by 60 to 110 points, according to The Credit People. Since payment history is the most important factor in credit scores, correcting such errors can have a significant positive impact.
Errors typically arise from four causes: mixed files (confusing your data with someone else's), outdated information, incorrect account details, or identity theft. Mistakes in names and addresses usually do not affect scores, but verifying all accounts and payment histories is crucial. Tayne advises checking reports line by line and filing a dispute with the credit bureau if anything seems off, providing supporting documents to speed up resolution.
To file a dispute, most online reports have a 'Dispute' button. The process generally involves selecting the error, explaining why it is wrong, and submitting evidence. 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 typically have 30 days to investigate and five business days to report findings.
Regular monitoring is key. Tayne recommends checking credit reports every three months. If your score drops unexpectedly despite on-time payments, review your report for newly reported incorrect late payments. Correcting errors can boost your score by over 100 points, potentially saving you thousands in future interest payments.
