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Mistakes Happen: Credit Report Errors Can Cause Bad Credit

Your credit report is a history of your financial activities used by creditors and other businesses to evaluate your applications for credit, insurance and employment. It is essentially your financial reputation. Unfortunately, the data contained in credit reports, which are bought and sold daily to nearly anyone who requests and pays for them, does not always paint an accurate picture.

Credit Report Errors Can Happen to Anyone

A credit report error can happen to anyone regardless of their credit rating. The three major credit bureaus maintain files on nearly 90 percent of all American adults. They collect and compile data about consumer creditworthiness from banks and other creditors as well as from public record such as lawsuits, bankruptcy filings and tax liens. Some mistakes happen when credit accounts change hands while other mistakes are simply human error. With over 30,000 data processors filing more than 4 billion updates to credit reports each month, this leaves room for errors.

Over 70% of all credit reports contain errors.

A study conducted by The Public Interest Group found that nearly 30% of credit reports contained serious errors that may result in credit denial and over 40% contained incorrect personal information. Furthermore, 20% were missing major credit cards, loans, mortgages, or other accounts that are critical when trying to prove good credit standing.

It's critical to stay on top of your credit report to avoid any mistakes made by the creditors and credit bureaus Equifax, Experian and TransUnion. Unfortunately, consumers rarely check their credit report until after they've been denied credit or otherwise encountered a problem due to bad credit.

If your credit file contains mistakes, it's typically because the report is incomplete, or contains data about another individual.

This usually occurs when:

  • You applied for credit under different names (for example, Lisa Smith versus Lisa Smith Jones)
  • Someone made a clerical error in reading or entering name or address information from a hand-written application.
  • You gave an inaccurate Social Security Number or the number was misread by the lender.
  • Loan or credit card information was inadvertently applied to the wrong account.

There are also other types of errors that may appear on your credit report and have a negative effect on your credit score.

These can and often do include:

  • Late payment information on your report that is old and outdated
  • Inconsistent credit limits being reported
  • Good credit accounts and payment history omitted
  • Showing the same loan reported more than once
  • Showing different balances that are due
  • Wrong information about the last activity date in an account

It is essential to keep your credit report accurate so you are prepared for your next big purchase. You should continually monitor your credit report. Look for errors and signs of identity theft that can lead to bad credit. If you find any errors or inaccuracies you should dispute them immediately with the credit bureaus so you can improve your credit score.

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