How to Dispute A Mistake On Your Credit Report
You know how to manage your credit cards. You use them responsibly, you don’t carry large balances, and you pay off what you owe.
You follow all the rules and tips about creating and maintaining a good credit score -- and yet, your score still isn’t great. What gives?
A mistake on your credit report could be to blame.
Don’t let errors ride on your report. Check your credit report annually and if you find an issue, know how to dispute a mistake on your credit report.
Where Does an Error on Your Credit Report Come From?
If you check your report and find an error, you need to report it to the credit reporting agencies immediately. The wrong information can show up on your credit history due to something as simple as a clerical error, or it could be a case of fraud if someone stole your identity.
There are also numerous mixups that can happen between these two extremes. Information about credit for someone with your same name could accidentally end up on your report. Or someone filling out paperwork for a loan could make a mistake, and their misprint results in the wrong data on your report.
Regardless of how they got on your report, these mistakes can ruin your credit and unfairly punish you by triggering a poor score.
And yes, a poor credit score can cost you!
What’s the Big Deal About a Simple Mistake?
A bad score means the difference between banks and other lenders seeing you as creditworthy or as a big financial risk. Financial institutions take a bad score to mean you’re a bad bet when it comes to lending you money. That may not be fair or even true, but that’s how the credit scoring system currently operates.
Credit reporting agencies calculate scores based on predictive data. They’ve taken tons and tons of information they collect and analyze it for patterns and correlations.
That’s why banks and other lenders see “poor credit” and think, “high risk of not paying back this loan.” The lower your score, the more of a risk you present.
And what that means for you is missing out on the best interest rates. If you have poor credit, you will have to pay a higher interest rate. It’s the lender’s way of offsetting the potential risk of you defaulting on your loan.
On big loans like mortgages or even private student loans, a high interest rate could cost you tens of thousands of dollars over time. With revolving lines of credit, like credit cards, it could mean getting stuck with a high interest rate you need to pay if you ever need to carry a balance for a little while.
Plain and simple, high interest rates make it more expensive to borrow money or finance a purchase. You want the best credit score possible, because it will get you the best interest rate available -- which means borrowing and financing costs far less.
Start the Dispute Process
“It’s much easier to resolve an error in a short time frame than waiting years later,” says Melissa Ellis, a CFP and the founder of Sapphire Wealth Planning. “You need to verify a lot of information in order to have an item removed or corrected on your credit report, and many companies don’t keep records available more than 2 or 3 years.”
So if you do find a mistake on your credit report, you need to dispute it immediately. “This can be done by making a phone call to the three bureaus, and sending a dispute letter to the company with a signature confirmation,” says Katie Gampietro Burke of Wealth By Empowerment.
You can find the contact information for all three credit bureaus on their website. Or let us help you take a shortcut. You can reach the dispute centers for the agencies by following the links below:
“Also, contact the company that incorrectly reported the information to the credit bureau,” suggests Ellis. “Ask that they notify each of the credit bureaus to explain their error.” This provides more documentation to back up your claim.
When you write out the dispute letter, make sure to include the account number associated with the error and provide clear explanation of the correct information.
“Attach any documentation that proves the error,” adds Justin Chidester, an Accredited Financial Counselor (AFC®) and owner of Wealth Mode Financial Planning. “The key is to then send the letter certified mail so the credit bureau knows that you know they received it!”
What to Do Once You Contact the Credit Bureaus and File Your Dispute
This is just the first part of the process. You need to take responsibility for this situation and don’t expect the credit bureaus to receive your request and handle the rest for you.
“Patience is a key virtue during this process,” says Deborah Meyer, CPA, CFP(R) of WorthyNest. Bureaus do have 30 days to send an initial response to you -- and that can feel like ages when you wait for a mistake to get resolved.
It’s also easy to forget you started the process. Life happens and other responsibilities demand your attention. Don’t let this slip off your radar. Write down a reminder, put it in your calendar, or give yourself some way to remember that you need to follow up if you don’t hear back from the bureaus and companies you contacted.
“You may have some follow-up correspondence with the credit agency to fully resolve any issue,” adds Meyer. “After the initial claim is filed by mail, feel free to call the credit agency directly or go online to address any remaining discrepancies.”
Once a reporting agency makes a correction, they should send you a letter stating they made the change. But you need to follow up with all the agencies to get this letter. Don’t just rely on one.
“Sometimes one credit bureau will correct the error in their records but the others stay stubborn,” explains Chidester. “Attach a letter from the credit bureau who listened to your request and corrected the error, and sometimes that will be enough for the other credit bureaus to deem that your dispute is legitimate.”
He explains that other agencies don't have to fix the error just because another bureau took the action, but it’s a strategy that does work to help get the others in motion.
Can You Prevent a Mistake on Your Credit Report?
Mistakes are not usually your fault, but errors on your report directly impact you and your score. Is there anything you can do to avoid these in the first place?
“Your information is circulated around so much between creditors, potential creditors, and the credit bureaus that there is bound to be an information transfer error at some point,” says Chidester. “It's often said that at any given time, 1 in 4 people have an inaccuracy on their credit report.”
That being said, the best thing you can do is to monitor your report so you can act fast if you do find a mistake. “Use a free tool like Credit Karma to constantly monitor your accounts,” suggests Chidester.
You should also follow best practices for financial security measures, like shredding sensitive documents before throwing them out and only using secure sites to share payment information. (Look for the https:// in the URL if you’re making a purchase.)
Ellis says that you’re entitled to an annual report from each of the credit bureaus every year. “Instead of requesting a report from Experian, Equifax, and TransUnion at the same time, request a report from one credit bureau every four months,” she advises. This reduces the amount of time it takes to review new information, and you can act quickly to resolve any discrepancies.
And if that mistake that includes negative information wasn’t so much of a mistake after all -- but something you actually did?
“Address it,” says Ellis. “You can write a letter stating the circumstances surrounding the incident, such as an extended illness, job loss, or traveling for an extended period of time.” She suggests that you share the facts and explain how you took action to avoid future problems.
Handle Errors Quickly and See the Process Through
If you find a mistake, act immediately. Contact the credit bureaus by phone and in writing, and prepare information and documents to back up your case.
Once you submit a dispute, don’t set it and forget it. Make sure to touch base with the reporting agencies if you don’t hear back. And if one bureau drops the mistake and another doesn’t? Contact the second bureau again and provide them with the letter showing the first fixed the error.
Remember, you can take some action to prevent mistakes. Monitor your credit carefully and keep your personal information safe. But if an error does slip through, act with confidence and make sure your credit history doesn’t take a hit for someone else’s mistake.