Nearly 20% of consumer credit reports contain errors that can have a significant impact on an individual’s finances including loan denials, higher interest rates, and other negative financial outcomes. These mistakes can make the individual appear as a high credit risk. In the United States, the law allows consumers to challenge these mistakes and it requires credit bureaus to remove inaccurate information.
A Ubiquitous Problem
Credit reporting errors are shockingly common. It is estimated that up to 20% of all credit reports contain significant errors. These errors can include everything from incorrect addresses, open accounts that are listed as closed, and even loans and debts that don’t belong to the individual. These errors can impact an individual’s ability to secure new credit, hinder career opportunities, and even cause insurance premiums to rise. As these impacts add up, they can have a significant influence on the individual’s relationships, lifestyle, and quality of life.
Approximately 79% of consumers who dispute incorrect information recorded by the credit bureaus are able to have that information removed from their credit reports. Credit Report disputes are most successful when the evidence presented is solid and irrefutable. For example, by providing receipts and other documentation that proves the information to be incorrect. Studies conducted by the Federal Trade Commission have shown that in approximately 99% of instances where consumers were able to remove negative information from their credit report that these errors are not repeated in the future.
The Importance of Vigilance
The law requires credit bureaus to provide consumers with one free copy of their credit report each year. Further, consumers are entitled to receive a free copy when they are denied credit. Consumers who wish to keep a closer eye on their credit can sign-up for one of many monitoring services that provide updates when changes occur on the individual’s credit report. Signing up for these services can minimize the impact of negative information by allowing consumers to take immediate action when it appears. With data breaches and identity theft commonplace, it is crucial for consumers to pay close attention to their reports and to maintain their own records of financial transactions that can be used to efficiently and effectively dispute negative information on credit reports.