Each time you apply for credit, lenders check your credit scores to determine how likely you are to pay back the money. Lenders use your credit score to decide how much money you can borrow and what your interest rate will be. A high credit score tells your lender that you will pay back the money you owe. Having a bad credit score does not necessarily mean you cannot borrow money, rather, a low credit score means you can borrow less money and you must pay it back at a higher interest rate.
Because so many people rely on credit to achieve their goals—like starting a business, buying a car, obtaining credit cards and qualifying for home loans and student loans—they assume their credit reports will be accurate and up-to-date. The truth is, mistakes on credit reports are common, and inaccurate reporting can cost you money or even the opportunity to obtain credit altogether.
Although the exact formula used to calculate your credit scores is a mystery, you must monitor your reports regularly for accurate reporting to ensure someone else’s mistakes do not affect your credit score.
Here are three important things you should know about credit reporting:
- You Have A Right To Know Your Credit Report: The Fair and Accurate Credit Transaction Act (FACT) is a law that entitles U.S. residents to view their credit report for free once every 12 months, including reports from the major consumer reporting agencies: Equifax, TransUnion and Experian. So, if you request your free credit report from one of the three credit bureaus every four months, you can keep a close watch on your credit score.
- Credit Reporting Errors Are Surprisingly Common: FACT requires the federal government to study the accuracy of credit reporting. The most recent study by the Federal Trade Commission revealed that about 25% of consumers identified at least one potentially material error on their credit report. A “material error” is an inaccuracy in the information used to generate credit scores, like late payments, missed payments and collections accounts. In other words, about 1 in 4 people found a potential reporting error on their credit reports that could affect their ability to borrow money.
- You Can Seek Modification Of Credit Reporting Errors: The Fair Credit Reporting Act (FCRA) requires credit agencies to investigate reporting errors. You must provide notice to the credit reporting agency in writing, via certified mail, of the inaccurate information and send copies of any documents supporting your position. The law says that inaccurate, incomplete or unverifiable information on your report must be removed or corrected. If a consumer reporting agency or an information provider violates the FCRA, you may be able to sue in state or federal court.
Do you need help with a mistake on your credit report? Let the attorneys at Cogburn Law Offices help you right the wrong today.