A credit report is a detailed report of a person's credit history. There are 3 credit bureaus in United States - namely Experian, Equifax and Transunion. These agencies collect information from a variety of sources, to create a report, and assign a numerical value called Credit Score based on their analysis. This report and the score is critical, if you are planning to borrow money, as lenders rely on the details in the report to determine the applicant's credit-worthiness.
Credit report mistakes are more common than you think. The Federal Trade Commission's 2013 study revealed that one in 4 (25%) consumers identified errors on their credit report. It is your responsibility to ensure that your credit report is accurate in every category. If not, you may either have become a victim of an identity theft, or a recipient of a bad loan costing you hundreds of thousands of dollars.
Here are the 5 steps to avoid costly mistakes:
1) Obtain a free copy of your credit report
As a consumer, you are entitled to a free copy of your credit report from all 3 bureaus on a yearly basis through AnnualCreditReport.com. This is the only authorized government website from where to obtain free copies of your credit report and scores.
2) Educate yourselves on various aspects of Credit Reports and Scores
Credit reports and scores are packed with information and you need to learn how to review a report. You also need to educate yourself on how hard and soft inquiries affect your score. This is a service that Mayanah offers to all their clients as part of our coaching.
3) Check for Identity Errors
Identity errors are those that are related to your identity. Common errors are:
- Ones with regard to personal information such as name, address, social security number, phone number, spouse's details etc.
- Additional accounts that third parties might have created as a result of identity theft.
- Mixed accounts, Duplicated accounts or Incorrect accounts - These need to be reviewed very carefully.
4) Check for Reporting Errors
Reporting errors are very common and some of them are:
- Accounts that incorrectly show as late or delinquent
- Accounts shown as open, when they were actually closed
- Same accounts listed multiple times
- Incorrect date of last payment, opened date or delinquent date
- An error in the type of account
5) Check for Balance Errors
These are errors with incorrect credit limits or balance amounts.
6) Take Steps to Fix Error
Ignoring any mistake in the credit report is catastrophic and you need to dispute it ASAP. The best option is to dispute it online.
You can learn more about online disputing at Lendedu.com.
Mayanah Financial Coaching encourages to review your credit report at least annually and fix any errors that might harm you in the future. However, we do not support borrowing to boost the credit score. We are against debt and we empower our clients to live a debt-free life. Contact us to learn more.
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