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How To Dispute Credit Report Errors

The United States is a credit-centred economy, and your credit score has a major impact on your financial well-being. A bad score can jeopardize your attempts to apply for bank loans, credit cards, and even jobs. The information in your credit history files is the basis of your score, and if that information is inaccurate, the financial consequences could be severe. A study by the Federal Trade Commission in 2012 found that one in five American consumers had identified at least one error in their reports that required correction, and one in 20 found mistakes serious enough to push them into a lower bracket.[1] You need to know how to contest factual errors on your report because inaccurate information can have serious negative consequences for your rating.

Reporting companies (or bureaus) collect information about your financial habits and circumstances and use this information to create your individual report. Creditors, insurers, employers and other companies use this report when they need to evaluate any potential applications, such as for a cell phone plan, credit card, a home or car loan or even an apartment.

There are three major nationwide bureaus: Equifax, Experian, and TransUnion. The reports created by these companies contain much of the same information, but there are often small differences. An error might appear on one report and not the others. That's why you need to obtain a copy of your report from each of these three companies if you want an accurate accounting of your score.

Errors and inaccuracies do occur. Fortunately, the Fair Credit Reporting Act (FCRA), allows you to dispute an item on your report. If the reporting company cannot verify its accuracy or it is shown to be inaccurate, they must remove the item from the report within 30 days after they receive the dispute.

Why Report Errors Occur
Errors usually occur for one of four reasons:

Identity theft – Someone could have stolen your Social Security number and opened new accounts in your name.

Mixed files – Many people have identical or similar names. That can cause files to be mixed up, and errors can be recorded as a result.

Information provider errors – Nobody's perfect. Information providers can sometimes simply make mistakes when it comes to handling your accounts. A lender might fail to report a payment, or a card provider might fail to record an increase in your limit.

Incorrectly aged debts – Most debts usually disappear from your report after five to seven years (10 in the case of Chapter 7 bankruptcies). Sometimes these dates can become muddled, especially if a creditor sells your debt to a third-party collection agency.

Obtain Your Report
Before you can start fixing any errors on your report, you need to know what they are. To do this, you need to get a copy of your report from each of the three main reporting bureaus.

You're entitled to request a free report from Equifax, Experian, and TransUnion every twelve months.[2]

With your reports in hand, sit down and go through them one by one with a fine-toothed comb. Depending on how extensive your history is, there is likely to be a lot of information, so make sure you put enough time aside to check them thoroughly.

Highlight any discrepancies you find, such as accounts you don't recognize, or late payment marks that you know shouldn't be there.

Filing a Dispute
If you believe there is inaccurate information on one of your reports, you'll need to dispute it with the agency that issued the report or the company that provided the information to them (your creditor).

To do this, you'll need to write a dispute letter and send it to the reporting agency, the information provider, or both parties, along with copies (not originals) of any documents that support your dispute as evidence.

Your dispute letter should clearly describe every item in your report that you want to dispute, state all the associated facts, explain why you are disputing the information, and state that you want it corrected or removed. You can enclose a copy of the relevant report with the disputed item (or items) circled.

An effective dispute letter should be properly laid out and include your return postal address so the reporting company can get back to you. A good example of a dispute letter can be found on the Federal Trade Commission's website here.

Upon receiving your dispute, the reporting company will either conduct an in-house investigation into the matter or contact the company that provided them with the information. Either party can take between 30-45 days of receiving your dispute to conclude their investigation.

What Happens Next?
If the information provider (your creditor) does find that the information on your report is inaccurate, it must notify all three bureaus and request that they amend your file.

Once the bureaus have removed a disputed item from your report, it cannot be put back unless the information provider can prove it is accurate and complete.

Even if a dispute doesn't go your way, and the item remains on your report, you can ask the reporting agency to put a notice of the dispute in your file, which will show up on future reports. You should be prepared to pay for this service.

If you filed your dispute with one of the three nationwide reporting companies, and it results in an amendment to your record, they are obliged to furnish you with a new (free) copy of your report.

If you ask them to, the reporting company will send a notice of correction to any individual or company that has received a copy of your report. This service covers a term of up to six months, or even up to two years if it was for employment purposes.

Your report should only contain information that's correct, and that relates to you specifically. That's why it's important to get a copy of your report on an annual basis and dispute whatever errors you may find in it. If you fail to do so, lenders might refuse to give you credit, or give you rates that are much higher than they should be, just because your report contains errors. The material in your report is not just bureaucratic information: your reports and score have an enormous impact on your quality of life. If you take your financial well-being seriously, you need to take credit report errors seriously.

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