Are There Errors in Your Credit Report?

These days, most consumers know the importance of the role their credit ratings and credit reports play in their everyday lives, but at the same time, many may not be aware that their credit report may contain inaccurate information that has a severe negative impact on their credit score.

It is generally agreed that a percentage of consumer credit reports contain at least some inaccurate information, but that number is up for debate, according to a report from the Huffington Post. Some studies show that just 25 percent of these documents have errors, and others find that as much as 80 percent of them are in some way inaccurate. For their part, however, the nation’s credit bureaus commissioned a study last year that found as few as 2 percent of credit reports carry incorrect data.

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Unfortunately for consumers, these incorrect entries may also have a negative effect on their credit score, the report said. And often, it isn’t always easy to get this information cleared, as the burden of proof that an entry is inaccurate is on the consumer, not the company that added it. Further, consumer advocates say that while the credit bureaus are legally required to look into any inaccurate information when a consumer files a complaint, these are often cursory and don’t involve a human investigator.

“[Credit bureaus] don’t undertake meaningful investigation, and automate everything in order to save money,” Chi Chi Wu, an attorney with the National Consumer Law Center, told the website.

The reason for this is likely that the sheer number of credit reports issued nationwide is staggering, the report said. Data from the federal Consumer Financial Protection Bureau shows the three largest agencies issue about 3 billion documents every year, and make as many as 36 billion updates to consumers’ files annually. However, fewer than 40 percent of Americans checked even one of their credit reports last year, which only serves to compound the problem.

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Consumers should check their credit reports as regularly as possible to determine whether their information has been mixed with another person’s account. Often, this is the result of a typographical error such as transposed digits in a Social Security number, or the other person having a similar name or address. When these mistakes are discovered, they should be reported right away.

Image: tomer lichtash, via Flickr