One of the most misunderstood things in the world, at least when it comes to finances, is credit. There’s plenty of information out there about what works, what doesn’t, and what you should be doing, that you’re not, to get a great credit score. Some people will tell you that you need to open up dozens of credit cards, while others say you need to get rid of all of your cards right now. The reality is that much of this information is only half true, inaccurate, or in some cases, downright bogus.
With that being the case, how are you supposed to know what’s currently impacting your score, and if that information is accurate? The best option to do so, that many people don’t give the care and attention they should, is their credit report. Your credit report gives you a complete snapshot of your life in credit, including how you’ve managed, or failed to manage, the different lines of credit and other financial obligations in your life. Even for people who have a good score, and check their report regularly, they don’t take the time to really dig into the weeds, and see exactly what information is being reported.
This is a mistake for anyone to make, but if you’ve got bad credit, it could absolutely be detrimental, and you need to start giving your credit report the time and attention it deserves. The Federal Trade Commission reported in 2012 that 26% of respondents had at least one major error on their report that was causing their score to drop dramatically. That’s a big impact for something that resulted from what was probably a simple error.
This guide will take you through the process of checking your credit score, and then correcting any errors that you find.
How to Check Your Credit Report
First and foremost, understand that there are three major credit reporting agencies, Experian, Equifax, and TransUnion, that compile and publish your credit report. There are other agencies, but anytime a check is made against you, especially those hard inquiries that can drop your score by a few points, it’s more than likely going to be through one of these three agencies.
Each of these agencies will allow you to check your credit score and report, once per year, for free. You can pay a small premium for each additional check, and checking your own score will never cause your score to drop, but at the minimum, take advantage of these free checks throughout the year.
Reading Your Credit Report
Once you’ve downloaded your report, check every area carefully, in the order it appears on the sheet. To start with, verify that your personal information is correct and up-to-date. There have been instances where people with similar names and birthdays have had the wrong information pop up in each other’s reports.
From there, continue down the sheet, paying special attention to everything in the “adverse accounts” section. These are accounts that have a potential negative transaction pending, such as a missed or late payment. Read these carefully, and if you catch an adverse action that you know shouldn’t be there, and you have the documentation to prove it, then you need to take action to correct it.
Be aware – if you legitimately missed a payment at any point, even if you’ve since paid off your debt in full, it could very well pop up on your report. There’s not a lot you can do about this. This information can stay on your report for up to seven years, and that’s a long time to have to wait for your score to right itself. Your best option to avoid this is to pay all of your bills on time, in full, and keep a receipt of every transaction you make.
Keep in mind also – each of the credit bureaus has their own way of compiling and reporting information. This is the reason why your credit score may vary slightly between the agencies, and why the reports contain slightly different data. You need to check all three throughout the year to make sure you’re in universally good standing.
Common Credit Report Errors
To help you as you scan through your credit report, I’ll list some of the most common things that tend to pop up wrong in credit reports, so be sure you check for these in every report. This list isn’t all inclusive, so just because it isn’t listed here, doesn’t mean it isn’t wrong in your report:
- Inaccurate address or personal information because of a handwritten application.
- Redundant information being reported twice in the same report.
- Credit card and loan payments being applied to the wrong card or account.
- Olda accounts appearing as “closed by grantor,” which makes it seem like your credit agency closed your account, not you.
- Have an ex-spouse’s financial information tied to yours, even after a divorce.
Once you’ve thoroughly read through your credit report, if you’ve found any issues, you need to start addressing them. This can be a pretty convoluted process, unfortunately. By law, and for reasons of fairness, the three agencies are not allowed to communicate with each other, except in instances of suspected illegal activity. What this means for you is that if have the same error on all three of your reports, you can’t just fix it for that one report – you’ll have to fix all three.
To start, gather the documentation that supports your dispute, such as a receipt for a paid bill, and make copies to send out. Do not ever send the originals. Next, gather the contact information for both the reporting credit agency and the organization where your inaccurate information came from. Send the nature of your dispute, and your supporting documentation, to both parties. This can be done through the mail, or online. In fact, Experian now only processes credit disputes online.
By law, the credit agencies have to address your dispute within 30 days of submission. If you’re found to be in the right, by law, both parties must either delete the inaccurate information, or correct it in your report immediately.
Keep in mind – your dispute may come back with a result that’s not in your favor. If this happens, you can seek legal counsel, which may or may not work for you. You can also request that a copy of your dispute be filed and included with future reports, so that anyone who pulls your report can see the nature of your dispute. This will probably cost you a fee, but to help improve your standing for a loan or credit card, it’s worthwhile investment.