How to Fix Your Credit Report
Article summary: This article explains the process of fixing credit report errors if you find that one or more of your reports has erroneous information on it.
This is a topic that every home buyer should understand, because it is closely related to the mortgage application and approval process. Thus, it's an important topic for home buying in general.
But before we talk about the basic process for fixing credit report errors, let's talk briefly about why these reports are important in the first place. Because once you realize the importance, you'll be more motivated to fix any credit report mistakes that you come across!
If you new to the world of credit (from a home buying perspective), you might want to start with this tutorial for a general overview of the subject.
Why Fix Your Reports Anyway?
When you apply for a mortgage loan, or any kind of loan for that matter, the lender will request copies of your credit reports from all three of the companies who compile that information -- Experian, TransUnion and Equifax. Your reports will also be converted into credit scores using the FICO scoring model. So the score is based on information found within the reports.
Now you are beginning to see the connection here. Errors in your credit reports can negatively affect your credit score, dragging it down lower than what it should really be. This will make it harder to qualify for a mortgage loan, and if you do qualify you'll probably end up paying a higher interest rate because of that score.
Now let's be frank here. Actually, you can be Frank and I'll be Sylvia. Ha! I love that bit. But seriously, let's be realistic. Your credit score might be low simply because you have some financial bad habits in your past. Maybe you've missed a bunch of bill payments, or maybe you have too much debt compared to income, or a combination of factors. In this case, you need to work on boosting your credit score ... as opposed to fixing errors on your credit report, which is the topic at hand.
Now you know why it's important to correct mistakes on your credit report, let's talk about how to go about doing it. The first thing you need to understand is that you have three different reports (as mentioned above), and they are not "shared" reports. This means that you could actually see different information on all three of them.
It also means that you could find an error on one report (e.g. from TransUnion), while the information provided by Experian and Equifax appears to be correct. So if you ever have to fix errors on your credit report you'll need to keep this fact in mind. You must contact the company that produced the erroneous report, as the information is specific to that company.
So that's your first step in fixing credit report mistakes ... you must contact the company and submit a dispute. This is a way of saying, "Hey, this information is not correct, and you need to fix it because it's affecting my financial status!"
So, you found an error on one or more of your credit reports and you've begun the process of fixing the error by submitting a dispute / correction form through the appropriate website above. That's all there is to it, right?
Unfortunately, no.
Here's another important lesson to take away from this article. When you begin contacting one of the credit-reporting companies about a mistake on your report, you will soon realize that you are not their customer. You will realize this because they will probably treat you in a fashion that suggests the same. The mortgage company who pays to obtain your credit report is their customer. The car dealer who pays to obtain your reports is their customer too.
But you are not their customer. You are a number ... a piece of data to them. And when you start demanding their investigation into a potential mistake on your report, you become a nuisance as well.
Is this right and fair? Of course not. I just want you to understand the reality of the situation before you attempt to fix errors on your credit report. When you go into the process understanding the dynamic, you'll be better prepared for what you must do next, which is to stay on top of them until things are sorted out!
As you would imagine, the credit-reporting agencies are somewhat regulated by Congress. Specifically, the Fair Credit Reporting Act dictates certain obligations these companies have, with regard to maintaining credit information on consumers (and correcting that information when it is clearly in error). The law was created back in 1970, and it has been more recently amended (2003) to try and force the credit-reporting companies to be more responsive.
With that being said, many consumer advocates argue that the act does not go far enough to protect consumers, that it is lazily enforced, and that the core problems that prompted the creation of the act are still very much around today.
When you begin the process of fixing errors on your credit report you should document everything. It's also a good idea to forward copies of your documentation to the mortgage lender, because it shows that you are contesting the erroneous information that is affecting your creditworthiness with the lender.
In the end, here's what you need to remember. The credit-reporting companies are not governmental organizations, as many consumers believe. They are companies driven by profit. In other words, it's in their interest to make as money as possible (like any other company), but it's not necessarily in their interest to look after consumers.
As a last resort -- if you're previous efforts to fix credit report errors have proven unsuccessful -- you can sue the company who has produced the erroneous information. If you can prove that certain information is false, and that the report has thus caused you financial harm, you could be entitled to damages (monies) paid by the company.
More information on how to sue a credit bureau over bad data:
http://www.bankrate.com/brm/news/special/19990820.asp
======================
Learn more about this subject:
The Home Buyer's Guide to Credit
======================
This is a topic that every home buyer should understand, because it is closely related to the mortgage application and approval process. Thus, it's an important topic for home buying in general.But before we talk about the basic process for fixing credit report errors, let's talk briefly about why these reports are important in the first place. Because once you realize the importance, you'll be more motivated to fix any credit report mistakes that you come across!
If you new to the world of credit (from a home buying perspective), you might want to start with this tutorial for a general overview of the subject.
Why Fix Your Reports Anyway?
When you apply for a mortgage loan, or any kind of loan for that matter, the lender will request copies of your credit reports from all three of the companies who compile that information -- Experian, TransUnion and Equifax. Your reports will also be converted into credit scores using the FICO scoring model. So the score is based on information found within the reports.
Now you are beginning to see the connection here. Errors in your credit reports can negatively affect your credit score, dragging it down lower than what it should really be. This will make it harder to qualify for a mortgage loan, and if you do qualify you'll probably end up paying a higher interest rate because of that score.
Now let's be frank here. Actually, you can be Frank and I'll be Sylvia. Ha! I love that bit. But seriously, let's be realistic. Your credit score might be low simply because you have some financial bad habits in your past. Maybe you've missed a bunch of bill payments, or maybe you have too much debt compared to income, or a combination of factors. In this case, you need to work on boosting your credit score ... as opposed to fixing errors on your credit report, which is the topic at hand.
The "How" of Fixing Credit Report Errors
Now you know why it's important to correct mistakes on your credit report, let's talk about how to go about doing it. The first thing you need to understand is that you have three different reports (as mentioned above), and they are not "shared" reports. This means that you could actually see different information on all three of them.
It also means that you could find an error on one report (e.g. from TransUnion), while the information provided by Experian and Equifax appears to be correct. So if you ever have to fix errors on your credit report you'll need to keep this fact in mind. You must contact the company that produced the erroneous report, as the information is specific to that company.
So that's your first step in fixing credit report mistakes ... you must contact the company and submit a dispute. This is a way of saying, "Hey, this information is not correct, and you need to fix it because it's affecting my financial status!"
Here are the dispute sections for all three companies:
So, you found an error on one or more of your credit reports and you've begun the process of fixing the error by submitting a dispute / correction form through the appropriate website above. That's all there is to it, right?
Unfortunately, no.
Here's another important lesson to take away from this article. When you begin contacting one of the credit-reporting companies about a mistake on your report, you will soon realize that you are not their customer. You will realize this because they will probably treat you in a fashion that suggests the same. The mortgage company who pays to obtain your credit report is their customer. The car dealer who pays to obtain your reports is their customer too.
But you are not their customer. You are a number ... a piece of data to them. And when you start demanding their investigation into a potential mistake on your report, you become a nuisance as well.
Is this right and fair? Of course not. I just want you to understand the reality of the situation before you attempt to fix errors on your credit report. When you go into the process understanding the dynamic, you'll be better prepared for what you must do next, which is to stay on top of them until things are sorted out!
As you would imagine, the credit-reporting agencies are somewhat regulated by Congress. Specifically, the Fair Credit Reporting Act dictates certain obligations these companies have, with regard to maintaining credit information on consumers (and correcting that information when it is clearly in error). The law was created back in 1970, and it has been more recently amended (2003) to try and force the credit-reporting companies to be more responsive.
With that being said, many consumer advocates argue that the act does not go far enough to protect consumers, that it is lazily enforced, and that the core problems that prompted the creation of the act are still very much around today.
When you begin the process of fixing errors on your credit report you should document everything. It's also a good idea to forward copies of your documentation to the mortgage lender, because it shows that you are contesting the erroneous information that is affecting your creditworthiness with the lender.
In the end, here's what you need to remember. The credit-reporting companies are not governmental organizations, as many consumers believe. They are companies driven by profit. In other words, it's in their interest to make as money as possible (like any other company), but it's not necessarily in their interest to look after consumers.
As a last resort -- if you're previous efforts to fix credit report errors have proven unsuccessful -- you can sue the company who has produced the erroneous information. If you can prove that certain information is false, and that the report has thus caused you financial harm, you could be entitled to damages (monies) paid by the company.
More information on how to sue a credit bureau over bad data:
http://www.bankrate.com/brm/news/special/19990820.asp
======================
Learn more about this subject:
The Home Buyer's Guide to Credit
======================
Labels: Credit scores
posted by Brandon at
6:18 AM
