Poring over your credit reports is no one’s idea of a good time. But the fact is they’re a must- read. One in four consumers say they’ve found inaccuracies in their personal data, some significant enough to downgrade their standing with lenders, resulting in higher interest rates for everything from car loans to insurance. “The longer errors go unaddressed, the more damage they inflict,” says Bruce McClary of the National Foundation for Credit Counseling. Learn how to spot common mistakes and clear your records.
You see a transposed number in your address or the wrong middle initial in your name. Although it may be just a typo, it has to be fixed pronto. “Even small errors can lead to an identity mix-up with someone who has terrible credit,” says Beverly Harzog, author of The Debt Escape Plan.
Rescue Plan: File a dispute with the credit bureau— Equifax (equifax.com) Experian (experian.com/ disputes) or TransUnion (transunion.com/dispute)— that has the inaccurate info and include copies of documents to support your claim. Also contact the lender who provided the false information. You can do this online, but it’s better to file via certified mail so you have a paper trail. A bureau usually has 30 days to investigate and report back; the lender is required by federal law to notify all three credit bureaus when corrections are made.
When a financial institution mistakenly reports negative info—like a creditor saying you were late paying a bill—the consequences can be huge. “Even one missed payment can bring your credit score down by 100 points or more,” says McClary. And shaving just 50 points off a 760 FICO rating can bump you from the “excellent” to “good” credit risk category. A lowered score could make you ineligible for the best terms on some forms of health insurance, home refinancing and more. It can also prompt lenders to raise your interest rate.
Rescue Plan: Contact the creditor as well as one of the credit bureaus. “You should initiate a complaint by going to the source, but working both sides ensures nothing slips through the cracks,” says Rod Griffin, public education director at Experian. Use the dispute option on the creditor’s website, or call the toll-free number on the back of your card. Be prepared to upload or mail documents such as payment confirmation emails to support your claim.
A charge card account was opened at a store where you’ve never shopped or you spot credit inquiries by unfamiliar lenders—either could be a sign that you’re a victim of identity theft and that someone may have stolen your Social Security number.
Rescue Plan: Notify the creditor’s or bank’s fraud department ASAP. Report your concerns to the credit bureaus, which can issue a fraud alert or, in extreme cases, impose a security freeze that prohibits you—or anyone else—from opening new lines of credit unless you first lift the freeze. File an Identity Theft Affidavit with the Federal Trade Commission (ftccomplaintassistant.gov or 877-ID -THEFT) as well as a police report, which, along with your affidavit, can expedite the removal of fraudulent accounts from your files so your record can be scrubbed clean.