Mistakes on a credit report can lead to lower credit scores and bad credit, resulting in denied borrowing privileges. A debt lawyer who handles consumer law cases can work with credit agencies to fix mistakes and repair credit scores.
Checking for Errors on a Credit Report
It’s important to review credit reports annually to make sure all information is accurate and up to date. Federal law allows every individual one free copy of their credit report from each of the three major credit bureaus (Equifax, Experian, and Trans Union) every 12 months from AnnualCreditReport.com. If a credit report does not show a credit score, it can be purchased from the credit bureaus for a small fee.
Studies show that 80 percent of consumer credit reports contain errors. Credit report mistakes such as false loans and credit card accounts, inaccurate payment history, collection, or closed accounts can significantly lower a consumer’s credit score and potential borrowing power. Common mistakes on consumer credit reports include:
- Incorrect Name – A consumer’s complete name should be reported accurately on a credit report. Mistakes with common names, as well as incorrect middle names or nicknames, may signal that another person’s information is listed on the report.
- Incorrect Biographical Information – Consumer information, such as current and previous addresses and social security numbers, should be accurate. If the credit report shows an address where the consumer never lived, it’s a red flag that another consumer’s information may be mixed into the file.
- Wrong Account Status – All accounts on a credit report should reflect the correct status. Consumers should review each account to make sure that current accounts are not reported as delinquent, and that open accounts are not reported in collections or closed.
- Duplicate Reporting – Each account listed on a consumer’s credit report should only be reported once. If an account is reported more than once, lenders may think there is higher consumer debt and deny credit for credit cards and mortgage loans.
- False Accounts – False accounts listed on a consumer’s credit report may signal identity theft. According to the most recent data from the Bureau of Justice Statistics, 17.6 million people were victims of identity theft in 2014. False accounts can also occur when one consumer’s credit file is mistakenly combined with another person’s file.
If a report contains mistakes, a consumer can write a dispute letter to prompt a credit investigation that will help resolve errors. If errors are not resolved or a consumer is denied credit due to mistakes shown on his/her credit report, a debt lawyer who handles Fair Credit Reporting Act cases can file a lawsuit.
In addition to reviewing credit reports, consumers should also check monthly billing statements on all accounts for suspicious charges that may signal identity theft. If unauthorized charges or fraudulently-opened new accounts are found, creditors should be notified immediately to freeze or close the accounts, and credit bureaus should be notified to place fraud alerts on credit reports. A fraud alert stays on a credit report for 90 days and requires creditors to confirm a consumer’s identity before opening a new account.
Resolving Credit Report Errors
Under federal law, if someone disputes information in his/her credit report to a credit reporting agency, the agency must investigate the dispute and correct the disputed information. Normally, credit reporting agencies have 30 days to investigate credit report errors and correct them. However, credit agencies don’t always take consumer disputes seriously, and many consumers end up filing multiple disputes or consulting a debt lawyer to resolve credit errors or file a lawsuit.
Credit bureaus who create consumer credit reports and credit scores have duties under the Fair Credit Reporting Act (FCRA). The FCRA is a federal law that regulates consumer credit reporting agencies, such as Experian, Equifax, and TransUnion. It also regulates those who provide information to the credit reporting agencies and those who use the information contained in a consumer credit report. The FCRA does not require credit reporting agencies to report accurate information. It merely requires them to use reasonable procedures to ensure maximum possible accuracy of the report.
If a consumer files a lawsuit with a debt lawyer, and proves that the credit reporting agency willfully failed to conduct a reasonable investigation of the dispute, the consumer is entitled to $1,000 in statutory damages or actual damages including loss of credit, higher interest rates, and provable emotional distress. If however, the credit reporting agency was merely negligent in failing to conduct a reasonable investigation of the dispute, the consumer is only entitled to actual damages. If a lawsuit is filed, the FCRA usually requires credit reporting agencies to pay a successful consumer litigant’s reasonable debt lawyer fees and costs.