Common Credit Report Errors & Why They Matter
Having a clean credit report is the key to getting a job, renting an apartment, and securing a loan with a reasonable interest rate. Few people are aware of how important their credit report is.
Unfortunately, many credit reports have errors on them, which not only pull down your overall credit score but can make you look like a credit risk when that is not the case. Every adult should review their credit report at least once a year by getting a free copy. Below, we list some of the most common errors that appear on reports and why they matter.
Personal Identity Errors
Many credit reports have the wrong name, address, or Social Security Number for you. Some people don’t think this matters. However, these errors could end up harming your credit score. For example, the credit history of someone with a similar name could show up on your credit report. If this person has bad credit, then their negative history will begin impacting your own score.
Also, employers and landlords might look at your credit report and try to match up the addresses where you have lived with the information contained in your application. You don’t want them to look at inaccurate information on the report and think you are lying on your application.
Account Balance Errors
These come in a couple of varieties:
- The report lists the account with an inaccurate current balance. For example, your balance might be $1,200 but $3,500 is listed.
- The report lists an inaccurate credit limit. As an example, your credit card has a $12,000 limit but is listed as having a $2,000 limit.
These errors matter because they affect your credit utilization rate, which is the amount of available credit you are currently using. For example, you might have a $2,000 balance on your 1 credit card, which has a $10,000 limit. The utilization is 20%–not bad. But if the credit limit is wrongly listed as $5,000, then your utilization is now 40%, which isn’t good. A higher utilization rate often results in a lower credit score.
Account Status Errors
Account status errors can be some of the most damaging in a credit report. For example, you might find:
- An account incorrectly reported as delinquent. This can obviously harm your credit score because it makes you look like someone who doesn’t pay bills on time.
- An account that is open reported as closed. This can reduce the amount of credit you appear to have and artificially inflate your utilization rate.
- A debt listed more than once. This can make you appear more in debt than you are.
It is important to clean up these and other errors on your report. You can contact each of the credit reporting agencies individually—TransUnion, Experian, and Equifax. You can also send a letter to flag any errors. The agency should investigate and make the correction within 30-45 days
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