By Gregory Karp, Chicago Tribune –
Errors on your credit reports might mean you could be denied credit or be offered higher interest rates than you should be. They could also mean you’ll pay more for auto insurance or be denied a new job. But even if you’re diligent about checking your reports and find a mistake, it can be a nightmare to correct it. It helps to know the proper steps to take.
A simple mix-up of similar names or an errant keystroke by someone entering information into a computer could mean errors in your reports and, at the extreme, financial devastation.
For those reasons, the Consumer Financial Protection Bureau (consumerfinance.gov) says it soon plans to begin oversight of the largest credit-reporting companies, including Equifax, Experian and TransUnion.
Credit reports detail your history of credit use and are often the basis for determining whether to extend credit to you in the future for a mortgage, car loan or credit card. You can access your reports with the three main credit-reporting agencies online at annualcreditreport.com, or call 877-322-8228. By law, you can retrieve one free report a year from each of the bureaus.
Quick tip: During routine checks, pull one free report about every four months, because the reports have much of the same information on them. That way you can continually monitor your credit year-round for free. More important? Check your reports, no matter which way you do it, said Liz Weston, author of “Your Credit Score” (FT Press, $19.99).
“Looking at them all at once is better than not looking at all,” she said.
Some 96 percent of free reports go unclaimed, said John Ulzheimer, president of consumer education at SmartCredit.com.
“That’s absolutely abysmal,” he said. “Credit bleeds over into so many important things, but it seems like consumers just don’t care.”
If you find a mistake on your reports, here’s what to do:
Determine whether it’s serious. If a street name where you lived three homes ago is spelled slightly wrong, don’t sweat it. It is unlikely to affect your credit. If you see a credit account you never opened or indications of late payments or a bankruptcy that aren’t yours, that’s a big deal. “If it’s wrong and negative, that’s much more important to address,” Ulzheimer said. Don’t be confused about how some creditors are listed. You might think you have a Home Depot credit card, but CitiBank is the actual issuer, and it will be the creditor name listed on your report, Ulzheimer said.
File a dispute, part one. Dispute the error directly with the credit reporting agency. If wrong information appears on more than one report, dispute it with each credit bureau.
Dispute by mail. You can file a dispute online or by mail. Online is easiest but not the best, especially if the report has a serious or recurring mistake, credit experts say. “The problem is you don’t have the ability to freehand your dispute,” Ulzheimer said of online disputes.
For example, you can’t explain how the negative mark on your report belongs to your son with the same name who moved out two years ago and probably stole your credit card. With online filing, you must categorize your dispute by choosing from a pull-down menu. “They don’t allow you to provide context to your dispute,” Ulzheimer said. By filing in writing, you can fully explain the situation and include copies of supporting documents, such as canceled checks or court documents.
Keep records. Send your letter by certified mail, “return receipt requested,” so you can document what the credit reporting company received, advises the Federal Trade Commission on its website. Keep copies of your dispute letter and enclosures.
What happens next? Credit reporting companies must “investigate” the items in question, usually within 30 days. Most times an investigation means the bureau asks the creditor if the disputed information is correct. And it’s not real people asking; it’s all computerized. “The whole process is incredibly automatic,” Weston said. “It’s not like one human being is picking up the phone and asking another human being at CitiBank, ‘Is this correct?’ It’s one computer querying another. It’s not an ‘investigation’ by any stretch of the term.”
Essentially, credit bureaus are just warehouses reflecting information collected from creditors; they just report what creditors tell them. “It’s garbage in, garbage out,” Ulzheimer said.
If the creditor agrees the information is wrong, the information will be corrected on all your credit reports. You shouldn’t need to repeat the procedure with the other bureaus. If a creditor says disputed information is accurate, the information remains on your report with the bureau. If a creditor doesn’t respond within the required 30 days, the information is supposed to be removed.
File a dispute, part two. If your efforts to correct a mistake fail through the usual process with the credit bureau, you can try again, but unless you provide different information, the result is likely to be the same, Ulzheimer said. The next step is to dispute the negative item directly with the creditor, often a bank.
“At the end of the day, they’re the ones you have to convince,” Ulzheimer said, adding that most times legitimate errors are the fault of the creditor, not the bureau. Again, disputing by phone is easier — the bank’s phone number is on your account statement or the back of your credit card — but disputing in writing gives you a paper trail that might be useful later. (It’s important to go through the credit bureau process first. If you instead file a dispute directly with the creditor, they are not obligated under law to do anything until you first dispute it with the bureau, Ulzheimer said.)
Get an attorney. If you can’t persuade the creditor to change the information, hiring a lawyer and potentially filing a lawsuit is your last resort. “If it’s an egregious violation, it’s pretty easy to find an attorney who will take that on contingency,” Ulzheimer said. “So, you don’t have to have a lot of money to sue a data furnisher or credit bureau.”
Sometimes all it takes is a stern letter from a law firm, Weston said. “Sometimes that’s the only way to break through this automated cycle of dispute and computer verification.” She suggests checking for lawyers with the National Association of Consumer Advocates, at naca.net.
What portion of credit reports contains errors? Seems nobody knows for sure. A study by the U.S. Public Interest Research Group suggests it could be nearly eight out of 10. Or if you believe a group funded by the credit industry, fewer than one in 100 have serious errors.
Weston said serious errors she hears about tend to stem from incorrectly mixed credit files, such as a father and son with the same name. She has heard about problems where the credit bureau thinks a person is dead, leaving the person with no credit history. Other times, it’s a case of identity theft.
“This is a fight worth fighting if there are serious errors in your credit report,” Weston said. “People who get serious errors taken off are ones who are persistent about it.”
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KNOW YOUR SCORE
Your credit reports are the basis for your credit scores, three-digit numbers that attempt to reflect your creditworthiness. You have many credit scores. If you want to see a score most similar to what a lender is likely to see — if you’ll be applying for a mortgage, for example — go to MyFico.com and pay for either your Equifax score or TransUnion score. (You can’t buy your Experian score anymore.) FICO Standard scores cost $19.95 each. If you’re just curious and want a general idea of where you stand, you can retrieve free non-FICO scores at such sites as CreditKarma.com, Quizzle.com and CreditSesame.com. Ignore sales pitches for monthly credit-monitoring services on the sites.
