How to Fix Errors on Your Credit Reports

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This article explains how to fix errors on your credit reports. The information presented below may not apply to all situations, because there are many different types of errors that can show up on consumer credit reports. The process for fixing them varies, based on the nature of entry. With that being said, the steps outlined below will apply to most situations.

Quick read: In a hurry? Here's the gist of this article in 100 words or less. An error on your credit report could lower your overall credit score, which in turn could make it harder to qualify for car loans, mortgage loans, and other types of financing. Thankfully, there is a straightforward (and government-regulated) process for correcting these types of errors. You can start the process online, through the website of the company that produced the erroneous report -- Experian, Equifax or TransUnion. Read on to learn more.

We believe every consumer should know how to fix errors on a credit report, because it affects your ability to qualify for financing down the road. Fortunately, the correction process is fairly straightforward in most cases. You would simply file a dispute through the company's website (see web addresses below) and follow up with any supporting documents, if needed.

That's the short version. Here's what else you need to know about fixing errors:

What Are Credit Report Errors?

There are basically two types of errors you might encounter on your credit reports -- (1) inaccurate information and (2) accurate information that should have already "expired" from your report.

Inaccurate information might include errors with your name or social security number, or it might include account information that's not yours. For example, if you look at your credit report and see a store credit card for Macy's listed in the accounts section, but you've never opened such an account, then you've got an error that needs to be fixed. It might be a data mix-up, or it could be a sign of identity theft. Either way, it needs to be corrected immediately.

Credit report errors can hurt your overall credit score, because the score is based directly on the information found within your reports. So if an error comes in the form of derogatory information (unpaid bills, collection accounts, bankruptcy, etc.), it can hurt your credit score.

How Common Are They?

A couple of years ago, the Federal Trade Commission (FTC) conducted a study of the credit-reporting industry in the U.S. They discovered that one in five consumers had an error on at least one of their three credit reports. That's 20% of the populace.

Additionally, they found that around 5% of consumers had errors that were severe enough to cause them to pay more for mortgages, auto loans, insurance, and other financial products. This comes in the form of higher interest rates, premiums and fees.

"These are eye-opening numbers for American consumers," said Howard Shelanski, Director of the FTC's Bureau of Economics. "The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don't, they are potentially putting their pocketbooks at risk."

Putting studies and statistics aside, here is the bottom line on this subject. Credit report errors are common enough that you should be concerned with them, especially if you plan to apply for some kind of financing in the near future. I recommend that you read through your reports once a year and fix any errors you find. By law, you are entitled to a free yearly report through AnnualCreditReport.com, so why not use it?

Why Bother Fixing Them? What's the Big Deal?

We will talk about how to fix credit report errors in the next section of this tutorial. But before we get to that, let's talk about why it is so important. Once you realize the importance of correcting erroneous information in your credit file, you'll be more motivated to actually do it.

When you apply for financing (personal loans, auto loans, mortgage), the lender will request copies of your credit reports from all three of the companies who compile that information -- Experian, TransUnion and Equifax. The information in your reports will also be converted into three-digit scores using the FICO scoring model, or some other scoring model. So the score is based on the information found within the reports.

Now that we've connected the dots, you can see why it's so important to fix credit report errors. They can result in a lower credit score. A lower score, in turn, will make it harder for you to qualify for financing. And if you do qualify for a loan, you'll probably end up paying a higher interest rate because of that score.

How to Fix Credit Report Errors

Now you know why it's important to correct mistakes on your credit report, let's talk about how to go about doing it. The first thing you need to understand is that you have three different reports (as mentioned above), and they are not "shared" between the companies that produce them. This means you could actually see different information on all three of them.

It also means you could find an error on one report (from TransUnion, for example), while the information provided by Experian and Equifax might be correct. Keep this mind if and when you have to fix errors on a credit report. You must contact the company that produced the erroneous report, as the information is specific to that company.

So that's your first step in fixing credit report mistakes. You must contact the company and submit a dispute. You can do this online, through the website of the company in question.

Experian:
http://www.experian.com/disputes/main.html

Equifax:
https://www.ai.equifax.com

TransUnion:
https://www.transunion.com/personal-credit/credit-disputes/credit-disputes.page

You can also just Google the company's name followed by "disputes."

Handling Disputes Online vs. By Mail

Thankfully, the process of fixing errors has gotten much easier over the years. There are two reasons for this: (1) government regulations and (2) the convenience of the Internet. When you dispute errors on your credit report, the reporting agencies (Experian, TransUnion and Equifax) must investigate the dispute in a timely fashion. There are federal laws to enforce this.

If they find that your claim is legitimate -- or if they are unable to verify the disputed item one way or the other -- they must remove said item from your credit report.

In the past, consumers had to fix credit report errors by mail, sending documents back and forth until the issue was resolved. You can still do it that way if you want, but you can also dispute errors online through the websites mentioned above. I usually recommend the online process because it's quicker than using regular mail, and you can log in through the website to check the status of your dispute.

If you choose to mail a letter, instead of using the online form, you can use this sample letter offered by the Federal Trade Commission. Just replace the items in brackets, as needed.

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Where to learn more: You'll find a wealth of information on the FTC website that explains how to fix errors on your credit reports. The FTC is the federal agency that regulates this industry, so you can consider them the authority on such matters.