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One factor that could knock your score down unfairly, are errors in your credit reports. And these, unfortunately, do happen. But they can be fixed. And it is easier to correct your credit report by understanding how credit bureaus handle disputes.
Why Your Credit Report is Important
Your three-digit credit score can mean the difference between nabbing that mortgage loan or remaining a renter. It can mean the difference between paying sky-high rates for your auto insurance or ones that you can actually afford.
A low credit score might even scuttle your chance to land your dream job. A growing number of employers — 60 percent in one recent survey — are looking at the credit scores of applicants when filling jobs.
It’s important, then, that your credit score is as high as possible. Ideally, it should be 720 or higher on the popular FICO credit-scoring system.
Unfortunately it is not uncommon for credit reports to obtain one or more errors. And, unfair as it is, these errors can knock your score down. For example, your credit report might say that you missed three auto loan payments in 2012, when you’re absolutely sure you’ve never mailed in a car payment late. Your credit report might list three open credit card accounts that you know you closed three years ago.
These errors can lower your credit score. But you can do something about it. It just requires you to take a deeper look at how the country’s three national credit bureaus operate and how they deal with consumer disputes. And to be prepared to write a detailed letter to the company explaining the errors and the corrections.
Three national credit bureaus compile credit information on consumers, TransUnion, Experian and Equifax. Each of these bureaus also maintain their own credit reports on consumers. This means that you have three credit reports out there, and there’s no guarantee that these reports say the same thing about your financial maturity.
You should once a year order your credit reports. You can get these for free from AnnualCreditReport.com. (Just make sure to order your reports from that site; other sites promising free credit reports are usually scams of some sort.)
You’re entitled to one free credit report from each of the three credit bureaus every 12 months. You can obtain your free reports from AnnualCreditReport.com.
Study the Information
Once you get your reports, study them carefully. Look for any negative information that seems odd or incorrect. (Check out this article for tips to reading and understanding your credit report.)
You might find records of missed mortgage payments or late credit-card payments. Maybe you see a credit card listed on one of your reports that you’ve never applied for or used.
If you find errors, it’s time to make a correction.
Unfortunately, doing this is far from a quick process.
Tedious Work of Correcting Your Credit Report
Correcting a mistake on your credit reports is tedious work. But it is important.
Once you find a mistake, tell the offending credit bureau in writing — you can find the bureau’s addresses at their Web homes — what information you think is inaccurate. You’ll also need to supply copies — send copies, not originals — of any documents that help support your argument. For instance, if one of your reports says that you skipped a car payment in May of 2009, make sure to send along a copy of the check that you sent to your auto financing company that month.
Your letter should include your complete name and address and a clearly spelled out request to remove the incorrect information. A sample credit report dispute letter can be found here.
You may also want to notify your creditor that made the erroneous report. If you are able to get the creditor to update the mistake in their credit reporting, it will make your task that much easier. Instructions on how to send a creditor a dispute letter are found here.
The Federal Trade Commission recommends that you send your letters by certified mail. This way, you’ll be certain that someone has received it. You can also document this way when the credit bureau received your request.
The Process Credit Bureaus Use to Handle Disputes
The credit bureaus must investigate the disupted items within 30 days, unless they rule that your dispute is a frivolous one. The bureaus will also send all your documentation to the company — whether that company is a bank, credit card issuer or lender — that provided the information that you claim is inaccurate.
This company must then investigate your claims and report back to the credit bureau. If the company agrees with you that the information on your credit report is inaccurate, it must then send a notice to all three credit bureaus so that they can correct the information.
Once the bureau wraps up its investigation, it must provide you the results in writing. It must also provide you with a free copy of your credit report if it has had to change information in your file.