Is your credit report wrong?
March 20, 2017
Did you know that credit reports often contain mistakes that affect how much you’ll pay for a mortgage — and even whether you’ll get a mortgage at all? It’s National Credit Education Month, and this is one of the most important things we could think of to alert homebuyers to.
The good news: You can get these mistakes fixed
A Federal Trade Commission study of the US credit reporting industry found that 1 in 5 consumers had an error on at least one of their three credit reports (from the three credit bureaus: Experian, TransUnion, and Equifax). Errors can damage your overall credit history and lower your FICO score, which plays a big role in your mortgage application. Your score can also affect what you pay for home insurance, not to mention other loans.
Fortunately, the FTC study also showed that 4 out of 5 consumers who filed a dispute succeeded in getting their credit report modified, and slightly more than 1 out of 10 saw a change in their credit score.
Of course, you have to know that the mistakes exist. So … have you checked on your credit report lately? It takes some time to dispute and correct mistakes, so review your reports well before you apply for a mortgage.
How to review your credit report
You’re entitled by federal law to a free annual copy of your credit report from each of the three credit bureaus. (You’ll pay a small fee to find out your FICO score, though.) Order your reports at annualcreditreport.com, a website shared by all three bureaus, or call 877-322-8228. This is the only official source for free credit reports.
For a small fee, a Homeownership Advisor can pull a merged credit report for you. Just like it sounds, this report combines information from all three reporting bureaus, including the credit scores. This is the report lenders use when you apply for a loan. It gives them a complete overview of your credit history and makes it easy for them to compare reports.
Besides looking for major mistakes, be alert for small ones. Is your name spelled correctly? Is your phone number up-to-date?
How to get mistakes fixed
Step 1: Dispute the mistake
Tell the credit bureau what you think is inaccurate. You can submit this information online. Each bureau’s website has a clear dispute submission process that you can access once you’ve requested your report.
If you prefer, you can also write the credit bureau directly. Use this sample dispute letter at the Federal Trade Commission website. Include copies (not originals—keep those) of documents that support your claim.
Besides providing your complete name and address, your letter should clearly identify each incorrect item in your report, state and explain the facts, and request a correction.
Step 2: The credit bureau investigates
After the company receives your claim, it has 30 days to forward it to the creditor who originally provided the information, decide whether it’s valid, and get back to you.
Step 3: They fix the issue (or not)
If they determine that the claim is valid, the credit bureau has to give you the results in writing, plus a free copy of your revised report.
If it’s not resolved, the item will stay on your report. But you can have your claim put in your file. That way, lenders (or anyone else who reviews your credit report) will see it and possibly take it into consideration.