How do errors wind up on credit reports?

Your credit reports should be an accurate representation of your current credit obligations and history of repaying loans. However, through no fault of your own, your credit report may contain inaccurate data. These errors could make it more difficult to qualify for a loan, credit card, employment, or housing.

What are common credit reporting error?

Credit reporting errors can take different forms. Some may seem small, such as an incorrect credit limit on your credit card (it can still affect your credit scores, though). Or, you may occasionally hear or read stories about consumers whose credit reports mistakenly indicate they’re deceased. It can be a difficult error to fix — and good luck getting a new loan or credit card in the meantime.

Some credit errors are also pretty easy to spot (e.g., you’ll know if you’re still alive). Others might not be as straightforward, partially because people may have misconceptions about what should and shouldn’t be on their credit reports.

For example, when you pay off a loan or close a credit card the account can remain on your credit report for up to 10 years. You may think it’s an error, but that’s actually how it should be reported. Similarly, some creditors don’t report to the credit bureaus and the lack of an account isn’t necessarily an error, either.

The Consumer Financial Protection Bureau lists some of the common errors you may find in your credit reports :

  • An account that you didn’t open is on your report.
  • There’s wrong personal identification information, such as a name or address.
  • The same account is open and listed twice under different creditors. If an account gets sold to a collections agency, it should be closed with the original creditor and then open with the collection agency.
  • There’s a mistake on one of your tradelines, such as an incorrect balance or credit limit.
  • An account shows the wrong date for when opened the account, were first late with a payment, or made your most recent payment.
  • Incorrect information that was removed from your report gets added back to your report.

Credit report errors can happen for a variety of reasons, as well. Here are the big three:

  1. A data furnisher sends incorrect information to the bureaus

Errors can originate from the company that sends information to the credit bureaus. In the credit world, these companies are referred to as data furnishers and they could include banks, credit unions, lenders, credit card issuers, and collection agencies.

The error could be the result of a typo, such a bank employee misspelling your name on a credit application or new account. When the bank sends your account information to the credit bureaus, the incorrect name could get added to your credit report or added to someone else’s report by mistake.

Miscommunication and faulty data systems could also be to blame. Say may pay off an auto loan and your lender acknowledges that you’ve completed your obligation, but you’re still seeing the auto loan as an open and outstanding account on your credit reports. There could be a problem with the communication channels between a company’s various divisions or computer systems, causing the company to incorrectly tell the bureau that your loan isn’t paid off.

  1. The credit bureau makes a mistake

There are three major nationwide credit bureaus, Equifax, Experian, and TransUnion. Each bureau gathers and organizes consumer credit information and uses the vast amounts of data to generate credit reports on millions of people.

When there’s a request for a person’s credit report, the credit bureau’s matching technology sorts through all the data to compile a report of the accounts and information linked to the person. The matching systems don’t necessarily need 100 percent of the information to be identical to consider it a match, and mistakes can occur when there are two people with very similar identifying information.

For example, if David Sr. and his son David live at the same address, there’s a chance their credit files could get intertwined. You don’t have to be related to share a similar name to have a “mixed file,” either. By chance, you could share a similar name and Social Security number with someone else, and their credit accounts might wind up on your reports.

  1. Someone fraudulently uses your identity

When someone else uses your identity to open a credit account, the account could get reported to the credit bureaus and appear on your credit reports. After all, neither the creditor nor the credit bureau know that you’re not the one opening and using the account.

If you notice errors in your personal identifiers, such as your address, name, or the listed aliases, that could also indicate someone fraudulently applied for a new account with your identity. A new hard inquiry on your report might be another clue, and you should contact the creditor to make sure a fraudulent account wasn’t opened.

You can also add fraud alerts to your credit reports (which could make it more difficult for someone else to use your credit) and file an identity theft report with the Federal Trade Commission (FTC). The FTC can help create a personal recovery plan based on the information you share.

Why worry about errors on your credit report?

Your credit reports and credit scores are important to your financial health. A low score and negative information on your credit reports could make it difficult to qualify for a mortgage, auto loan or credit card. Your credit reports could even impact your insurance rates and ability to rent an apartment.

An error could be hurting your creditworthiness. Correcting those errors could therefore help you get the offers you deserve.

Fixing credit report errors

If you find an error one of your credit reports, you can file a dispute with the credit bureau. Under federal law, the credit bureaus must investigate the information and either correct or delete anything that’s incorrect, incomplete, can’t be verified, or should have previously been removed from your report.

We’ll take a deeper dive into how to dispute credit report errors in a separate post. If you want help identifying potential errors in your credit reports, you could upload a copy of your report and CreditDash will analyze it. If we find any errors, we’ll also help you draft the dispute letters you can send to the credit bureaus to get the errors corrected.

Link to “Found an Error on Your Credit Report? Here’s How to Dispute It”

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