Take the following steps to ensure you know what to do if you find errors on your credit report.
This post originally appeared on LearnVest.
We all make mistakes — and credit bureaus are no exception. According to a Federal Trade Commission report, one in five Americans has an error on her credit report — which can lead to overpaying on interest rates and even being denied credit.
The good news, however, is that credit report errors can be corrected — as long as you know how to spot them.
How to catch those mistakes before they do damage to your finances? Follow these quick steps.
Why it’s an important move
If you didn’t know already, credit reports are a bit like a personal money biography — they record your fiscal past and play a role in your financial future.
Whether you’re applying for a mortgage or a new credit card, lenders largely rely on your credit report to help determine what interest rate you’ll pay — and poor credit can cost you. Drivers with a low credit score, for example, can pay twice as much for car insurance as their well-credited counterparts.
And it doesn’t stop there. “Credit reports can also be used by employers to evaluate candidates,” says John Ulzheimer, a credit pro from CreditSesame.com. “So they even transcend financial services.”
With so much riding on your credit report, it’s time to get sleuthing!
How to get moving
Step one is to pull a copy of your credit report.
Under the Fair Credit Reporting Act, all Americans are entitled to one free credit report from each of the three major credit bureaus — Experian, Equifax, and TransUnion — each year. To download one of these reports at no cost, head to annualcreditreport.com.
Report in hand, there are a few different types of errors you’ll want to check for, starting with the identification fields — where most errors occur, says Ulzheimer.
“It’s often a misspelled name, or an address you’ve never lived at,” he explains.
While many of these errors may simply be typos, some identity mistakes can create serious credit headaches — such as if your name gets conflated with someone else’s, and you start seeing his or her accounts on your report.
Next, review the account listings, where more serious errors are typically found. Go through this section with a fine-toothed comb to sniff out:
- Accounts that don’t seem to belong to you, which could be a sign of identity theft.
- Accounts that display incorrect credit limits.
- Erroneous notations of late payments.
- A loan marked “open,” when you know you’ve closed it.
If any of these show up on your report, you’ve got some fixing to do.
Have a few more minutes to spare?
Hopefully, your due diligence will uncover a clean credit report.
But if you do spot a mistake, quickly contact the bureau that generated the report and dispute the error. This handy checklist will take you through that (lengthier) process step by step.
And whether or not you found errors, give yourself a pat on the back for taking control of your credit — and your future finances.