Credit Reports: Why Bother Checking?

In recent years, identity theft has been cited as the key reason to check your credit report on an annual basis. But a recent consumer report indicates another extremely important reason to regularly check your credit history for suspicious activity and errors. 

A study by the U.S. Public Interest Research Group in Washington indicates that one in four credit reports has errors serious enough to keep you from buying a home, opening a bank account or getting a job. The federal government, for instance, runs background checks and sometimes uses credit history as a bona fide reason for turning down job applicants (particularly in positions where they don’t want employees who might easily be bribed). 

A poll by the Society for Human Resources Management showed that about 35 percent of the companies surveyed pulled credit reports of current or potential employees last year. On the financial side, it isn’t very often that a credit report error keeps someone from getting a loan, but mistakes in your credit report can certainly slow down and complicate the approval process. 

Of 197 credit reports surveyed from people in 30 states, 54 percent included personal identifying information that was misspelled, outdated, belonged to someone else or was otherwise incorrect. Thirty percent contained credit accounts that consumers had closed but that remained listed as open.

The federal government has also taken note of the problem. In December 2003, Congress passed the Fair and Accurate Credit Transactions Act (FACT Act), which is designed to improve the accuracy of credit reports. Thanks to the FACT Act, consumers are entitled to a free annual credit report on request.

Reporting errors

If you do find errors after requesting credit reports from all three major credit bureaus – Experian, Equifax and TransUnion, you should take the following actions:

• Write letters to each of the three credit reporting agencies clearly identifying which items from your report you believe to be inaccurate and request a deletion or correction. Be sure to provide your complete name and address.
• Enclose a copy of your report with the items in question circled.
• Include copies (not originals) of documents that support your position.
• Send your letter by certified mail, return receipt requested, so you can document that the credit bureau received the information.
• Keep records of everything and everyone you talk to.

Errors can also be reported electronically via the credit bureaus’ websites.

www.equifax.com (Equifax)

www.experian.com (Experian)

www.transunion.com (Trans Union)

After you’ve made your case

• The law requires credit agencies to investigate disputed information and correct inaccuracies within 30 days of hearing from a consumer.
• The credit bureaus must forward all relevant data you provide about the dispute to the information provider. (You should also send your own letter with copies of all documents supporting your position to whatever business or creditor is supplying the wrong data to the credit bureau.)
• After both the information provider and credit bureau investigations are complete, you should receive a free copy of your report if the dispute resulted in a change.
• If an investigation does not solve the problem, ask the credit agency to include your statement of the dispute in your file and in future reports.