Many people never check their credit reports and find out at the worst possible time that they contain errors – for example, when they are applying for a mortgage. These mistakes could be caused by anything from a typographic error to an incorrect account posting to attempted identity theft. No matter what the cause, these errors can result in a higher interest rate, or prevent you from getting a loan at all. You are much better off looking for mistakes on a regular basis rather than discovering one by accident when you really need credit.
It’s important to check all three credit reporting agencies (Equifax, Experian and TransUnion), because they do not all receive the same information. You can see your TransUnion credit score and read your credit report for free by joining MoneyTips, where soon you will be able to access your three reports.
If you notice negative items that you think shouldn’t be on your credit report, check the age of the information before taking steps to correct it. Most negative marks remain on your report for seven years before dropping off, but bankruptcies linger for ten years. If any debt remains longer than that, the credit bureau might have the incorrect date for the item.
If you find errors on your credit report, how do you fix them? You can contact either the creditor or the credit reporting agencies first. Generally, it is best to start with the credit reporting agencies, but simple clerical errors may be correctable through the creditor. Keep in mind that if you deal directly with the creditor and you are dissatisfied with the result, you will not be able to sue the creditor without initiating a dispute through the credit reporting agency. “It can be a time-consuming process to file with the company and then to follow up, and then to double check to make sure any errors have been removed from your credit reports,” says Millennial Money Expert Stefanie O’Connell.
Assuming you are starting with the credit reporting agencies, you need to initiate a Credit Dispute Form with them. You can initiate the dispute online or with a letter written to the reporting agency. All the agencies steer you toward the online path because of convenience. However, there often is not enough room on the form to supply full explanations of the issue, or adequate means to supply supporting documents, such as proof of the correct date, amount, or terms of the debt.
If you have a reason to speed up the process, like a pending mortgage application, and are willing to take the risk of an online dispute, you certainly can do so – but we advise writing a letter instead.
Clearly state what information is inaccurate and why. Several online sites offer sample dispute letters as a template. Go into detail, stick to the facts, and support your position with copies of any relevant documents. Do not send the originals. Remember to include your name and address and check that your name is listed as it is on the credit report (if not, that could be the problem!). “It’s really important that you follow through with every step in the process and that you keep a record of every step in the process,” advises O’Connell. “So that you can reference it throughout the process of getting errors fixed.”
Send a copy of the same information to the creditor. If you send them a copy, they cannot claim that they were given incomplete investigative information if you decide to sue.
Make sure you send both letters by certified mail with return receipt, so nobody can claim they were not informed.
The credit reporting agencies will forward the information to the creditor, and will reply to you within 30-45 days, either by written or online/e-mail contact, depending on how you initiated the dispute report. The burden is on the creditor to verify the charge. If they do not respond, the credit reporting agency will remove the error.
The creditor is also supposed to notify all three credit agencies with corrected information within 30-90 days, but it would be best to check all three reports. If the situation is not resolved, ask for a statement of the dispute to be included in the file and all future reports. For serious unresolved errors, you can possibly file a complaint with the Consumer Finance Protection Bureau, or investigate legal action against the credit reporting agency. Legal action through an attorney or credit repair agency is likely to be expensive and does not guarantee a satisfactory resolution to your dispute.
The important points: examine your reports closely and regularly, start with the credit reporting agency, do everything in writing, be detailed in your descriptions, keep all original documentation, and send everything by certified mail. If you follow this template, you are probably more likely to get a favorable resolution and avoid having to pursue legal action.
As O’Connell points out, “The reason it’s so important to get those errors fixed on your credit reports is because an error can negatively impact your credit score. A poor credit score could mean a higher interest rate and that could get very expensive over the long term.” If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, join MoneyTips.