Some guidance on how to correct credit report errors
Q: We recently had to dispute a credit report error before formally applying for a mortgage. How common are credit issues and is there a speedy way to make corrections?
A: The credit reporting system is both huge and complex. According to the Consumer Financial Protection Bureau (CFPB), the three major credit reporting agencies (CRAs) — Equifax, Experian and TransUnion — “cover about 1.6 billion credit accounts per month on more than 200 million adults.”
Given so many accounts and a massive volume of credit items, it follows that 100 percent accuracy is impossible. There are mistakes, there are complaints about mistakes and there are complaints about the complaint response process itself. The big question is what can be done to find errors before they damage your credit standing?
A dispute system is in place that allows consumers to contact CRAs when a consumer finds credit report errors. The system also allows individuals to contact the CFPB with complaints when dissatisfied with CRA responses. There were more than 700,000 consumer complaints between January 2020 to September 2021 for the three largest CRAs. Most involved six common items:
1. Information on the account for someone else
2. Incorrect account status
3. Inaccurate personal information
4. Reported errors not fixed
5. Consumers were not notified about dispute results
6. Investigations took more than 30 days
From a mortgage perspective, inaccurate credit report information can lead to lower scores, and lower credit scores can mean higher mortgage rates if not outright rejections. One consumer told the CFPB their score fell by nearly 100 points because of a credit report error. Such extensive damage is rare, but errors can hurt credit scores. Marginal borrowers — those who might or might not get financing — can be especially hurt by credit report mistakes.
There are several steps to take to rid credit reports of inaccurate information.
Check your credit reports for inaccurate information and out-ofdate items, items that are generally more than seven years old. Chapter 7 bankruptcies can stay for as long as 10 years, while judgments can sometimes remain on reports for more than seven years. For a free credit report from each of the three major credit reporting agencies, go to AnnualCreditReport. com.
If you want to dispute an item, contact the CRA. The CFPB has contact information for the CRAs at https://bit. ly/3zsgd9J.
If the dispute is with a business, then contact them using a model form from the Federal Trade Commission at https:// bit.ly/3H6333O.
If you’re in the middle of a mortgage application, ask the lender if a so-called rapid rescore to quickly update credit reports and scores will make sense in your situation.
Act now. It can take weeks if not months to straighten out credit report issues. It pays to regularly check credit reports so that when a need for credit arises — say the purchase or refinancing of a home, buying a car, opening a credit card account, etc. — the information best representing your situation is immediately available.