How to Fix an Error on Your Credit Report

Did you know that errors in credit reports can actually cost you a lot? This is why it is important to recognize them. In this article, we’ll look at how to identify them, who makes these errors, how to dispute errors, and how to check for updates in the credit report.

My credit report has always been admirable; it has never received a single derogatory remark. A few years ago, I had applied for an auto loan, with high hopes of purchasing my dream car.

I was appalled to discover that I wasn't eligible for an auto loan. What’s worse - I had no clue as to why it was rejected!

Upon further probe into my credit report (which I hadn't bothered to check earlier), I was shocked to discover that I had an unknown delinquent loan account! Of course, it was a reporting error. However, the loan was rejected, my car purchase plans were postponed, and I had to wait for quite a long time to get the matter sorted out.

How Do Mistakes in Credit Reports Cost You Financially?

Mistakes in credit reports are very common as well as blunderous. If they go unnoticed, these mistakes can fatally damage your credit health for no fault of yours at all. A reporting error can occur for multiple reasons and on multiple aspects of your financial life.

• It could bring down your credit score and also put you in difficult situations.

• It could spoil your credit health with a disparaging remark.

• Lenders can refuse to lend money to you due to these credit report errors.

Read on to understand how serious these mistakes can be and how you can keep yourself safe from their consequences.

What Kind of Errors Could Turn Up on Your Credit Report?

Your credit report could contain simple mundane credit report errors such as incorrect name, address, gender, and erroneous identity numbers like PAN, Aadhaar, or date of birth. These credit report errors do not affect your credit score. You do need to get them rectified nonetheless.

There could also be mistakes in the payment dates, account status, date of loan closure, etc. Such mistakes are severe and will affect your credit score. Your loan application could get rejected or you could be blacklisted by banks due to these errors on your credit report. If you find one of these mistakes, you need to act immediately.

However, this is not exactly the limit. Errors on credit reports could be way worse. Someone else's loan could appear on your credit report, or there could be a mistake in the amount overdue. These errors have serious implications and can harm your credit report considerably.

If you wish to keep your credit report clean, you must keep tracking your credit score from time to time. You can use mymoneykarma's Intelligent Finance Tool to stay on top of your credit reports. Whenever you spot a mistake, act immediately and get it rectified.

Who Makes These Errors?

Compiling a credit report is a multi-layered process. The banks and financial institutions make data entries and submit them to the credit bureaus; the credit bureaus aggregate your data from different sources and formulate a report. The credit report errors could occur at either or both of these stages.

There are a plethora of possible errors at the submission stage. The data submitted by the financial lenders is compiled and entered by many people. Human errors are natural. Manually entered data could have typographical mistakes.

There could be other mistakes pertaining to your credit behavior as well, such as payment or settlement status, latest balance, outstanding amount, etc. Credit report errors could also originate from the time lag between collecting the data and submitting it. Here’s an example-

Let's assume that your payment date is on the 5th of every month and the lender submits its reports on the 8th - your payment submission might not reflect in the report and your account status might not get updated.

Sometimes banks outsource the task of loan collection to third-party agencies, who might collect the amount from you but make a slight delay in depositing the same and informing the bank about it. Cheques might also take time to be processed and hence your submission dates might be erroneously recorded.

At the aggregation stage, there could be manual as well as machine errors. Bureaus generally use complex algorithms to assess your data. There could be computational errors due to unavailability or similarity in personal details. For example, your name could be the same as another person's and his or her loan could appear on your credit report by mistake.

How to Correct These Errors

Some of these reporting errors could seriously impact your credit scores if they go unnoticed. You must be alert and follow these guidelines to detect the errors and fix them.

• Spot the Errors

People generally suffer because they fail to spot the credit report errors. Most of us do not bother to check our credit reports. Instead of being torpid enough to not check your credit reports right before applying for a new line of credit, you need to be hyper-vigilant. Scrutinize your credit report intently and spot the errors. You could use mymoneykarma's credit score tracker to keep an eye on your credit report.

• Take Action

Once you spot a discrepancy, take immediate action. If the error concerns an incorrectly reported loan (such as a mistake in the date of closure or the amount overdue), approach the lender. The lender will recheck, verify the details, and then submit the corrected details to the credit bureau.

• Contact the Credit Bureaus

If you find critical mistakes, such as a loan that you haven't taken at all, approach the bureau directly to register a complaint. Each bureau has its own dispute resolution system - you can find the forms on their website, and they can either be submitted online or downloaded and sent via post.

Once you register a complaint, the bureau will check with the bank and sort it out. The dispute should ideally be resolved within 45 days of raising the issue. All credit bureaus follow a similar procedure of filing a dispute. Here is a quick overview

All the three credit bureaus have a dispute filing system on their website. This is the easiest and quickest way of solving your problems. You must follow these steps to file your dispute:

• 1. Go to the dispute filing page of TransUnion, Experian, or Equifax.

  2. Fill in the form and attach the scanned copies of the documents required to support your claim.

  3. Submit the form. You will get an email receipt.

  4. The bureaus will start investigating your complaint and you will be alerted whenever there is an update.

  5. The inaccurate data will be removed or changed. Accurate data cannot be removed from the report.

• Check For Updates To Your Credit Report
  Once the error has been rectified, a fresh credit report will be generated and emailed to you. You can also login to the concerned bureau’s website and view your rectified report.
  Generally, the bureaus take around 30 to 45 days to complete the investigation and give you a fresh credit report.

It may take some time for updates to appear on your credit report. How much time it takes shall depend on the credit bureau in question, its update cycle, and when the new information becomes available to the bureau.

If you see that several months have passed and you still have not received the credit report, contact the bureau in question. Ask the furnisher to verify when it shall be delivered, and verify whether your account information is given to the bureaus. 

To Sum Up

It is always advised that you inculcate responsible financial behavior. An important part of this responsibility is to make sure that your credit reports are error-free. This requires patience and dedication when you check your credit reports. Keep yourself financially secure by identifying credit report errors and get them rectified at the earliest.

Your financial guide, mymoneykarma, is here to help you in every possible way - click here to check your credit score for free.