This is a guest post by Tina Roth, a personal finance blogger.
A lot depends on your credit report when you seek a loan. Creditors will ask you to produce it, check it thoroughly, and maybe even raise their eyebrows while skimming through it. If the report is full of errors, the odds of getting a loan would take a nosedive. So when you find errors in your credit report, you may want to visit the credit bureau and dispute it.
Before you take any such step, you may want to read up on the correct procedure of disputing charges in your credit report, and the possible downsides. Knowledge is power, and by sharing all the information with you in this article, I’ll make you…uhh, a bit more powerful (pun intended).
The process of disputing credit report errors
After you get the credit report, go through it and look for any purchase or transaction you haven’t made. You can take a list of such errors to the credit bureau or the creditor because it supplied incorrect information to the credit bureau. Once the creditor corrects those mistake, an updated credit copy will be transmitted to the credit bureau.
Why do credit report mistakes and errors occur?
Credit report generating agencies usually have mechanisms to identify mistakes and do away with them. They tally customer information in their database and the information in the report. But sometimes, errors escape their sight and find a place in the report.
Here are a few common reasons errors arise in credit reports:
- Creditors are responsible for supplying details that make up your credit report and even though the process is highly automated, mistakes do occur as machines are prone to technical glitches. As a result, your name, address, social security number, transaction history and purchase details may be incorrectly entered in your credit report.
- After you successfully cut down the interest rate on your credit card, the creditor may still show the same old interest rate against your card because their systems have not been updated.
- Another reason for errors is due to inconsistencies on the part of consumers when entering their details during a transaction or when filling up an online form.
Disputing credit report errors with the creditor
All credit reporting agencies have policies to deal with disputed situations, in which the customer holds the furnisher or the creditor responsible for errors. They’d consider the charges disputed until the dispute between the furnisher and the customer settles and the “disputed” label can harm your credit score.
Equifax, a credit reporting agency, reveals the disputes to future lenders. Their policy categorically says any lender who requests a credit report will get to know about the dispute. TransUnion and Experian also have the same policy.
Disputing errors and mistakes with credit bureaus directly
There is an advantage of taking the matter directly to the credit bureaus — they won’t add the word “disputed” to your credit report. It’s a big relief considering how a dispute can negatively affect your credit score.
Experian and TransUnion have same policies regarding this. According to them “you (customers) won’t necessarily see any indicator on the report itself that says it is in dispute.” Equifax has a different approach. Lenders can label the item as “Consumer Disputes — Reinvestigation in Process.”
The downsides of disputing credit report errors
The first downside is a negative impact on your credit score. You may see your credit score dip. The worst case scenario is that you have opted for a home loan and at the same time, challenged a mistake. The lender may decide to put the mortgage on hold until the dispute is resolved.
What is assuring is that hold-ups such as this are only temporary as most disputes are resolved within a short span of time. On average, it takes slightly more than two weeks for a dispute to resolve. Also, customers are allowed to request for the removal of the “Under Dispute” notation.
Sometimes, the credit card holder is not the person who uses it. For example, a credit card belonging to a parent may he used by a child to make an online purchase, without the immediate knowledge of the parent. If the parent views the transaction, he/she may be tempted to dismiss the transaction as an error, and may take this dispute to a credit bureau. To make sure no incident like this happens, cardholders are advised to stay alert.
Advice to customers regarding credit report errors
You can get your credit report for free, but not more than once a year. Order your copy from all three credit bureaus, and compare the information. Once you see an error, make sure you or any member of your family is not responsible for it.
Once you are fully sure either the creditor or the credit bureau is at fault, dispute the error/s. As we’ve stated earlier, it’s better to go to a credit bureau. Visit the bureau’s website and download the form to initiate a dispute.
What do you think of the tips given here? Have you ever found any error in your credit report? How did you resolve this? Let us know by posting a comment below.
Tina Roth is a personal finance blogger who loves to help people live a financially secure live. Her personal finance blog, Pro Finance Blog, is all about helping people get the best tips to manage their money. When she is not writing, you can find her busy with her budget sheet.