An inaccurate credit report can be very costly. The consequences range from higher interest rates on loans to denial of a job application. One study estimates that as many as 25% of credit reports contain inaccurate information. Here is a step by step guide to fixing an inaccurate credit report.
Order a Free Copy of the Report from Each Bureau
In the U.S., there are three major national credit bureaus: Equifax, TransUnion and Experian. Each bureau prepares its own reports based on the information that it receives about customer credit accounts and other important data. Lenders may use reports from any or all of the credit bureaus to make important decisions about potential customers. Therefore, it is important to obtain copies of the credit reports from each of the three credit bureaus.
Under federal law, consumers are entitled to one free copy of their credit reports per year from each credit bureau. An additional free copy may also be obtained under certain circumstances, such as unemployment or suspected identity theft. Credit reports can be obtained by writing or calling each bureau or contacting the bureau online.
Search for Errors, Omissions and Incomplete Information
Once the credit report is obtained, it is necessary to search the report item by item to look for errors. In order to accomplish this successfully, it may be necessary to consult old records and bank statements, as well as to individually contact creditors for verification.
It is particularly important to note the dates of negative information, such as bankruptcies, which should be removed from the reports after a period of time. As a general rule, most negative information, such as chargeoffs and late payments, should be removed from the record after seven years. Bankruptcy normally remains on the report for ten years. However, these items are not necessarily removed automatically. It may be necessary to make a request for the expired items to be removed.
Contact the Creditor and/or the Credit Bureau
If inaccurate information is found, it will be necessary to contact the credit bureau and in some cases the creditor as well. A copy of the credit report with the inaccurate information highlighted or otherwise noted should be enclosed, along with copies (never the originals) of any receipts or other documentation that supports the consumer’s position. These communications should always be sent by certified mail, return receipt requested. This is the best way of demonstrating that the letter was actually received.
Make a Specific Request
It is important to make the request that the inaccurate information be changed. Generally the credit bureau must investigate the dispute within 30 days and keep the consumer informed as to the results of the investigation. It is also important to request that, if the information is changed, the new information be reported to any party that has requested the credit report within the past six months.
Hiring a Credit Repair Agency
Although the process of fixing errors on the credit report is not difficult, it can be painstaking. Many consumers find it best to hire an outside agency. The agency will take the responsibility for communications with the credit bureau and creditors and ask the consumer for the specific documentation that is required. Most agencies charge a fee for their services.
However, there are unscrupulous agencies that promise to make illegal changes to the credit report in exchange for an exorbitant fee. It is illegal for these companies to knowingly attempt to change accurate information on a credit report, so it is very important that the consumer become aware of the process and the law in order to avoid such agencies.
Correcting inaccuracies in the credit report is extremely important. In most cases, the matter can be handled quickly and easily. In more complex cases, the services of an attorney may be required. The first step is to obtain a free copy of each credit report and carefully search for possible errors.