Unfortunately, many people do not learn about the importance of having accurate listings on their Credit Report until it is too late. Perhaps this describes you:
- You applied for a home or car loan, but then received a credit denial letter because of an inaccurate balance listed for a separate loan on your Credit Report.
- You submitted an application for your dream job, but then failed the security clearance because your Credit Report lists a delinquent credit card account belonging to a family member or stranger.
- You applied for a new apartment, but then the landlord said “No” because your Credit Report has a listing of a debt in collection, even though you don’t recognize the debt at all.
Importance of Accurate Credit Reports
You are not alone. Many people have errors or inaccurate listings on their Credit Reports. Preventing or fixing these errors could increase your odds of getting a new loan or be hired or promoted to a new job. In fact, Credit Reports are regularly used by banks, landlords, and employers to decide whether to offer financing, lease out an apartment, or promote an employee. Your Credit Report is your reputation, which makes it especially important that you make sure every listing on your Credit Report is accurate.
Credit Reports v. Credit Scores:
What’s the difference?
Lenders may look a prospective borrower’s credit reports and credit scores to evaluate creditworthiness and their risk of extending credit. There are several factors that help determine the likeliness of a borrower to pay back a loan on time. Both Credit Reports and Credit Scores provide this type of information and can be useful tools in the decision-making process to approve a loan.
Let’s understand the difference between the two.
A credit report is a comprehensive list of your lines of credit and payment history. Whether you’ve applied for a mortgage, auto loan or personal loan,
the lender – a bank, credit union or financial institution — will request access
to credit reports from one of the 3 credit bureaus. Credit reports can be used
to determine an applicant’s eligibility for loans, credit cards, rentals, insurance policies and jobs.
Credit Reports include:
-Personal information, including social security number, birth date, residences, phone numbers and employers.
-Public records, such as judgments or child support obligations.
-Credit accounts, including dates accounts were opened or closed, credit limits, payment history, and account balances.
Hard Pulls: Applications for credit such as an auto loan, credit card or personal loan require the lender to obtain permission from the consumer.
Soft Pulls: Businesses where the consumer has an existing relationship may access a consumer’s credit file for the purpose of extending a new credit opportunity or Service.
The credit score is a numerical value calculated from different pieces of data on a consumer’s credit report and used by lenders to assess your “credit risk”. Factors such as, the total amount of debt, age of credit, payment history, types of debt, and credit inquiries weigh in to the calculation of this number. The credit score may change over time to accurately reflect a consumer’s current financial behavior. Scores range from 300 to 850 and may fluctuate depending on account activity.
Monitor Your Credit Reports
Because Credit Reports are used so frequently in important life matters, it is very important that you maintain a credit history free of negative listings. A negative credit listing could be based on obligations where a payment on a credit card was missed, or a medical debt listed as “in collection,” or a “repossession” listed by the lender for your car loan.
You should be regularly checking your credit reports to ensure accurate listings. When looking at your credit report, ask yourself:
- Have my creditors been reporting my account history accurately?
- Are my creditors providing current account information?
- Has old, negative information been removed (over 7 ½ years old)?
- Is there anything that I do not recognize?
Keep Your Credit Reports Private
Regularly checking your Credit Report is another way of ensuring your credit privacy. Your Credit Reports contains unique financial account information, payment histories, past addresses, and other personal details about your credit history. Because Credit Reports contain such sensitive information, they can only be accessed by either you or someone with proper authorization.
The Fair Credit Reporting Act allows creditors, employers, landlords and others to pull a consumer’s credit report, but they must have a permissible purpose. If it does not, that entity must have the consumer’s permission before the report is pulled. Hard inquiries may appear on the consumer’s report as a result of credit pulls with a permissible purposes. For example:
– A credit application is submitted to a lender for a mortgage, home equity loan,
auto loan, personal loan or credit card
– Employment or promotion with an existing job (with a special disclosure form) – Apartment Lease
– Insurance Application
– Security Clearance
– Business Transaction
– Application for certain government benefits or licenses that require a review of your financial background.
The Fair Credit Reporting Act sets forth basic rules that protect a consumer’s credit information. When an individual or business pulls a consumer’s credit report when they have no legal basis to do so — this is called an impermissible purpose. When a Credit Report is obtained without proper authorization, the consumer’s rights may have been violated. For example:
– If a company or salesperson accesses a potential customer’s credit report before the customer expresses interest in a credit sale or lease.
– If a creditor pulls a credit report after the debt is discharged in bankruptcy or the account has been closed.
– An employer pulls your credit report without asking your permission.
– Someone request your report to use as evidence against you in a divorce,
criminal, personal injury, or other non-credit lawsuit or proceeding.
– A landlord attempting to collect past-due rent, unless the landlord has obtained a judgment against you.
So check your Credit Reports frequently to see if there are any “hard inquiries” listed that you do not recognize.
Identity theft is another reason you should be regularly checking your Credit Reports. Identity thieves use your information to open accounts in your name, which then appear on your Credit Reports. If you don’t recognize an account on your Credit Report, you may be a victim of identity theft.
If you suspect your identity has been stolen, it’s important to take steps to secure your personal information and prevent further damage to your credit.
The Main Sources of Credit Reporting:
Transunion, Experian and Equifax
Credit reports are compiled by credit reporting agencies, also known as credit bureaus. By law, the credit bureaus are required to give you one free copy of your credit report every twelve months. There are many credit bureaus, but we recommend requesting your credit report from Trans Union, Equifax, or Experian because they are more likely to have the most comprehensive and up-to-date credit information.
So, how do you get your credit report? You have a few options:
- Write directly to the credit bureau to request a copy of your report and enclose two forms of identification, such as a current driver’s license and utility bill,
with your request. It may take about two weeks to receive the reports from TransUnion, Equifax, and Experian.
CLICK HERE for a template letter to request your report.
- Request your report online through annualcreditreport.com. This website allows you to access your credit reports instantly. But, keep in mind that this method requires you to agree to terms in a “click” agreement, which could negatively impact your consumer rights.
Typical Credit Reporting Errors
So what are the typical errors you might see on your credit report? There are many, but to name a few:
- Credit reporting agencies may have mixed your credit file with someone who has a similar name. This would lead to the inaccurate reporting of that person’s accounts on your credit reports.
- Your creditors may be reporting inaccurate information to the credit bureaus. For example, they might report nonexistent late payments or an inflated balance.
- Your credit report might list the same debt multiple times.
- Your creditor or the credit bureaus may have failed to keep your credit information up to date.
- Your credit report might show accounts that you do not recognize, which is a sign of identity theft.
- Your credit report might lists debts from an ex-spouse.
Dispute Credit Reporting Errors with Transunion, Experian & Equifax
So you found an error on your credit report. Now what?
Credit bureaus are required to report accurate information. And, they are also required to re-investigate the accuracy of reported information when the consumer disputes an error. To have an error corrected or removed from a credit report, a written dispute must be sent to the credit bureaus that report the inaccurate information.
It is very important that you dispute in writing and by mail, for many reasons.
- The dispute process takes time. You need to clearly state the problem on your report, supply documents that support your claim and state the need to correct, update or remove the listing.
- Credit bureaus are not required to re-investigate if you make a complaint over the telephone.
- A written dispute allows you to support your dispute with specific evidence, such as a proof of payment, a police report or a letter from a creditor.
- Most importantly, disputes made through online services often require you to agree to terms in a “click” agreement, which could negatively impact your consumer rights.
After you dispute, the credit bureaus have 30 days to respond in writing with a determination. If the error has not been corrected, you may need to send another dispute by mail with additional documentation or clarification of the inaccuracy. Be sure to keep copies of all dispute correspondence that is sent to and received from the credit bureaus. These documents are important for an attorney to review when errors have not been corrected by the credit bureaus.
Take Steps to Improve your credit
Improving credit health is not easy. It requires dedication and discipline. Take these four steps to work towards a strong financial future.
- Assess your credit.
Ensure the accuracy of your credit history. Obtain current credit reports from each of the big three credit bureaus: Trans Union, Equifax, and Experian. Evaluate which accounts you must keep, and those that you will pay off and bring to a zero balance.
- Determine where you can make improvements.
After review of your credit reports, dispute any inaccuracies that may be negatively impacting your credit reputation. Make sure your credit reports are an accurate reflection of your financial history.
- Identify financial goals
After reviewing all credit card and loan accounts, identify ways to pay debts and prioritize accounts that can be paid to reduce your debt -to-income ratio. As well, you may consider ways to increase your income.
- Outline clear steps to achieve your goals.
Set a date to have your debts satisfied in full. Resolve to make sacrifices that will help you meet your goal. Treat yourself for your accomplishments.
Free Legal Evaluation
Flitter Milz represents consumers in matters involving credit reporting accuracy and privacy violations of the Fair Credit Reporting Act. Contact us for a free consultation to evaluate your credit reports from Transunion, Experian and Equifax, and to determine whether your consumer rights have been violated.