Why an Accurate Credit Report is Important
Your credit report can open doors and close them. If your credit report shows a history of on-time payments, low balances, and a variety of accounts it can help you obtain a mortgage, a loan, a credit card, and other financing options. However, if your credit report shows missed payments, high balances, and other negative information, it can make your life exceptionally difficult. Negative information on credit reports can cause loan denials, mortgage denials, and credit card denials. In certain circumstances, negative credit reporting can also impact your ability to rent an apartment and obtain employment.
This happens because credit reporting agencies such as Experian, Equifax, and Trans Union compile details about your financial history into credit reports. These reports are in turn provided to banks, mortgage companies, insurance companies, stores, and landlords who use them to decide if you are a credit risk.
Negative information shows up on your reports and affects your credit score, which is a three-digit summary of your credit record, thus limiting financing opportunities. Scores above 700 can open pathways to low-interest loans and refinancing options, while scores below 659 can place you in a world of financial barriers. All this makes the accuracy of your credit report very important. And accuracy should never be presumed. According to a Consumer Reports analysis, complaints to the Consumer Financial Protection Bureau (CFPB) regarding credit report errors have more than doubled since 2021.
More specifically, the Consumer Reports analysis showed that such complaints jumped up from 165,129 in 2021 to 443,321 in 2023. An earlier study by the Federal Trade Commission found that approximately 21% of consumers in a representative group confirmed the existence of errors in their credit reports; and 13% had errors that affected their credit score.
How to Know Whether Your Credit Report is Accurate
The Fair Credit Reporting Act (or FCRA), a federal law enacted by Congress in 1970, gives you the right to obtain a free copy of your credit report from nationwide credit reporting agencies every 12 months. Additionally, the three major credit reporting agencies — Experian, Equifax and Trans Union — have permanently extended a program that lets you check your credit report at each of the agencies once a week for free. Consumers can request such reports by going to annualcreditreport.com and asking for a mail copy or an online copy. Though it may take longer, requesting a copy by mail is often a better option because online requests may link to websites that nudge consumers into signing up for extraneous services that they do not need.
You can request these free reports whether or not you suspect something is wrong. You have a right to these reports even after learning of an error through a credit denial. Yet it is often wise to obtain and review your credit reports before applying for any type of financing.
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How to Dispute Inaccurate Information on your Credit Report
If you notice inaccuracies on your credit report, the Fair Credit Reporting Act (FCRA) gives you the right to submit a dispute and request an investigation. You can submit a dispute for nearly any type of error, including errors about missed payments, lateness, balance amounts, the entire existence of an account, address information, and employment history. Although not required by the FCRA, it is prudent to submit your dispute in writing so that you have a record. You should also submit your dispute to all credit reporting agencies that have reported erroneous information.
The FCRA requires credit reporting agencies like Experian, Equifax, and Trans Union to review disputes and respond within certain time frames. These agencies are required to send disputes to the company that supplied or furnished them with the account information. Such companies, whose names appear on your credit report, are known as furnishers. Under the FCRA, both the credit reporting agency and the furnisher have responsibilities for correcting inaccurate information. But keep in mind that your dispute to the credit reporting agencies is what triggers your rights under the FCRA. Below are some guidelines to consider.
i. Submit a Clear and Specific Dispute in Writing to Credit Reporting Agencies
Write a clear and straightforward dispute letter. Clarity is important as you do not want to give the credit reporting agency an excuse for not responding. Despite how frustrating the situation may be, avoid lengthy diatribes as this will take away from the clarity of your letter. Also, ask someone you trust to read the letter to see if your points are understood.
Regarding the specifics, your letter should identify what you are disputing and explain why it is incorrect. For instance, if you are disputing a specific account with a company, be sure to include the account number and the company name that appears on your report. If your dispute pertains to a delinquency, identify the month and year where it shows incorrectly on your report and explain whether you made a payment during the time period at issue. If your dispute pertains to balance issues, identify the incorrect balance that appears on your report and explain why you believe the amount is incorrect. If you are claiming that you have no accounts with a company that appears on your report, be sure to state that and explain whether you believe the reporting is the result of fraud.
Your letter should also tell the credit reporting agency what you would like it to do. For example, in cases of fraud or identity theft, ask the agency to investigate the account and remove it from your report entirely. In cases of incorrect delinquencies, ask the agency to adjust the reporting to show a timely or accurate payment date. For a more concrete example, the Federal Trade Commission has an excellent dispute letter template that you can use to get started.
ii. Include Identifying Information
The credit reporting agencies will want to know that you are who you say you are. This means that your letter should include adequate identification information about yourself. Many agencies ask you to state your date of birth, your social security number, and also include a copy of a government-issued identification. Specific instructions on what to include can be found on the websites for the credit reporting agencies and on the Federal Trade Commission website.
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iii. Correctly Identify the Account Number Issue
Sometimes debt collectors and creditors will use their own internal account number when communicating with you. Such internal numbers often do not match what shows on your credit report. So double check that the account number you write in your dispute letter matches the number shown on your credit report. If the wrong number is used, there is a chance that the credit reporting agency will deny your request or tell you that they could not find the account.
iv. Attach Supporting Documentation
If you have documents that help show that your credit report is incorrect, you should attach them to your dispute letter. Some useful documents include payment receipts, payment confirmation emails, account statements, and correspondence with the furnisher. If you are claiming that the account is fraudulent, include a police report and an FTC identity theft affidavit. If you attach documents, be sure to mention them in your letter. Dispute letters with supporting documents are often treated more seriously by the credit reporting agencies.
v. Request a Description of the Investigation Procedure
If requested, the Fair Credit Reporting Act requires agencies to provide consumers with a description of the procedure used to determine the accuracy and completeness of information provided, including the business name and address of the furnisher. You can make this request for procedures through a separate letter if the credit reporting agency does not properly correct the error. Agencies have 15 days to provide you this after receiving a request.
vi. Send the Dispute Letter by Certified Mail
Certified mail with a return receipt requested is often the best way to submit your dispute to the credit reporting agencies. This method will provide you with a record of when you sent your dispute and when it was received. Consumers do have the option to submit disputes online, and this can be quicker and more convenient. However, when disputes are submitted online, it is often difficult to retain proof of your dispute. This is especially true if you submit your dispute through dropdown-box forms that appear on the websites for many credit reporting agencies. Such forms can also limit your ability to express the problem in your own way. For such reasons, a certified letter with a return receipt is usually the best way to go.
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vii. Send an Additional Dispute Letter to the Furnisher
Your dispute to the credit reporting agencies is what gives you certain rights under the Fair Credit Reporting Act – rights that you can use to bring a legal action if the dispute is not handled properly. Such rights are not available if you send your dispute only to the furnisher (i.e. company who furnished the information to the agencies). Despite this, nothing should stop you from sending a dispute letter to the furnisher in addition to the dispute letter you send to the credit reporting agencies. This will ensure that the furnisher has been notified. This will also give the furnisher less of an excuse for not responding.
viii. The Time Credit Reporting Agencies Have to Respond
The credit reporting agency usually has thirty days to investigate your dispute and respond. If an item is changed or deleted, the agency cannot put the disputed information back into your credit report unless the furnisher verifies that it is accurate and complete. In addition, the credit reporting agency must send you a written notice that includes the name, address, and phone number of the furnisher who verified the information.
However, a consumer reporting agency may terminate an investigation if it reasonably determines that a dispute is frivolous or irrelevant. The agency must notify you of this determination not later than 5 business days after making it. If the agency does not respond at all, you may have rights to bring a legal action against them.
ix. Options Exist if Your Credit Reporting Errors are not Fixed
If your dispute does not fix erroneous reporting, you have further options. First, you can ask the credit reporting agency to include a statement of your dispute in future reports. You also can ask it to provide your statement to anyone who received a copy of your report in the recent past. You can also file a complaint with the Consumer Financial Protection Bureau (also known as the CFPB). You may file this complaint online (www.consumerfinance.gov/complaint), by phone at 855-411-2372, or by mail. Lastly, you may also file a lawsuit if your rights under the Fair Credit Reporting Act have been violated.