The Real Problem With Credit Reports: Errors (and How to Dispute Them)

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The real problem with credit reports isn’t the scoring math. It’s the data. A Federal Trade Commission study found that about one in five consumers had an error on at least one of their credit reports, and roughly one in twenty had an error serious enough to push them into a worse pricing tier on a loan.

That matters because your score is only as good as the report it’s built from. An error can mean a denial, a higher interest rate, or a higher insurance premium, and you won’t know unless you look.

Why credit report errors happen

• Furnishers report the data, not the bureaus. Lenders, card issuers and collection agencies send information to Equifax, Experian and TransUnion. The bureaus mostly pass it along as received.
• Mixed files. People with similar names, addresses or Social Security numbers can have accounts land on the wrong report.
• Sold debt. When a debt is sold to a collector, the old account and the new collection can both show up, sometimes after the debt is already paid.
• Medical billing mistakes. Insurance delays and coding errors are common. The three bureaus no longer report paid medical collections or medical collections under $500, but larger unpaid ones can still appear.
• Identity theft. Accounts you never opened are the most damaging error of all.

Step 1: Pull all three reports

You can get free reports from all three bureaus every week at AnnualCreditReport.com, the official site. Pull all three. Each bureau gets slightly different data, and a mortgage lender will look at every one of them.

Checking once isn’t enough. New errors show up whenever a creditor updates your account. A monitoring service like SmartCredit alerts you when something changes, so you can catch a problem before you apply for a loan.

Step 2: Look for the errors that cost the most

• Late payments you didn’t make, or that were reported for the wrong month
• Accounts that aren’t yours
• Paid or settled debts still showing a balance
• The same debt listed twice (original creditor and collector both showing a balance)
• Negative items older than seven years (most negative information must come off after seven years; Chapter 7 bankruptcy stays ten)
• Wrong credit limits, which make your utilization look higher than it is

Step 3: Dispute with the bureau and the creditor

Under the Fair Credit Reporting Act, you can dispute inaccurate information for free. File online with each bureau that shows the error, and include copies of proof like statements, payment confirmations or a police or FTC identity theft report. The bureau generally has 30 days to investigate. If the creditor can’t verify the item, it has to be corrected or removed.

It also helps to dispute directly with the company that reported the item, since they’re the source of the data.

If you’d rather not handle the letters yourself, an app like Dovly automates disputes with TransUnion (see our Dovly review). For more complicated cases, see our guide to the best credit repair options or, if a creditor won’t fix a clear error, legal help for credit report errors.

Step 4: Keep building positive history

Removing errors is half the job. The other half is adding good data. On-time payments and low card balances do the heavy lifting. If you have thin credit, a credit-builder account like Self reports monthly payments to all three bureaus. Our 4-step guide to fixing your credit walks through the full plan.

Buying a home soon?

Start checking your reports at least three to six months before you apply for a mortgage. Disputes take time, and a single corrected late payment can change the rate you’re offered. The Rate Update can review your credit with you before you apply.

Affiliate disclosure: some links on this page are affiliate links, and we may earn a commission if you sign up, at no extra cost to you. Dan Frio | NMLS #246527 | PBT Bancorp | NMLS #257781. Mortgage products are originated by PBT Bancorp, NMLS #257781. Equal Housing Lender.