 Many consumers have been the victims of identity theft, where thieves build an entire false identity using the victim's good credit history -- taking advantage of the proliferation of instant credit offers and credit card mail solicitations that inhabit our mailboxes. While this is certainly an unfortunate occurrence, many others have had their credit affected by credit bureau errors that often aren't discovered until the consumer makes a major purchase, such as a home or automobile.
In fact, a friend recently received a rejection notice from a credit card company to which she'd applied to obtain a low-interest card. She was shocked because she'd always had good credit, but doubly so since she and her husband had recently purchased a home.
After receiving a copy of her credit report in the mail, she noticed an $8,000 credit card charge-off on a card she had never owned that was sent to an address where she never lived. It turned out that the credit card company had included someone else's information on her report -- a person whose new credit card was stolen before she'd ever received it. It took about 45 days, but the erroneous information was eventually removed, a new credit report mailed out, and her credit restored to its pristine condition.
A recent study conducted by the Public Interest Research Group (PIRG) found more than 70% of credit reports contain errors. Other findings were that 29% of the credit reports contained serious errors that could result in the denial of credit. These errors included false delinquencies, public records or judgments that belonged to a stranger, or credit accounts that did not belong to the consumer.
Needless to say, it pays to order and check your credit report now for any errors before making a major purchase, such as a home or car, and avoid any potential repercussions in the future.
How errors occur and how to prevent them
Errors can appear in several ways. For example, is the John Doe on Orchard Street the same as the Jonathan Doe on Orchard Avenue? Or, human errors occur when typos are made or handwritten credit applications are misunderstood. Or sometimes a consumer's payment history is reported to credit bureaus incorrectly. For example, an error in your credit report may occur when a payment is applied to the wrong account. Any of these mistakes can cause major headaches later. To avoid them and ensure you get the credit you deserve, here are some steps to follow when applying for new credit: |
- Always use the same name on all credit cards, loans and lines of credit. For example, to eliminate confusion Ima B. Spender should not omit her middle initial in some accounts, or use the name I. Big Spender for others.
- If you're a "Junior" or a "Senior," always include this designation after your name -- so credit grantors don't mix you up with someone else.
- Always list your address and your previous addresses for the past five years on your credit applications. This will help credit bureaus link together pieces of your credit history, even if you move across the country.
Understanding what's on your credit report
Credit bureaus sometimes have unfamiliar definitions to certain common words. It can be confusing, so it's important to know what things mean as you're checking for errors:
Current. If you see this term to describe an account, it means you're making -or have made - payments on time. Even if the balance is $0 - or the account is closed - it still will appear on the credit report as "current." Though most people might define current to mean "up to date," the credit industry uses it to mean the opposite of delinquent.
Paid. One might think of a paid account as one that's paid off, right? Not in the computers of a credit bureau. It's actually an account that is closed. So if you've paid off an account, for example, it won't be listed as paid unless you have also closed it to new charges.
Another tidbit to keep in mind: late payments are more serious than you think. If you make a late payment, a record of that delinquency will remain on your credit report for seven years from the date the payment was due. This is true even if you later pay your bill in full.
Protect your credit
Under the Fair Credit Reporting Act, credit-reporting agencies, creditors and information providers are responsible for correcting inaccurate or incomplete information in your report. So, if you find an error in your report, let the credit bureau know. It's a free service, and the bureau can ask the source of the information (a credit grantor, for example, or a government agency) to verify your dispute. Once it's verified -- usually within 30 days -- they will remove the item from your report.
Overall, it's better to be safe than sorry when dealing with credit, especially if you're about to purchase your dream home. A little pre-planning beforehand will make closing day that much sweeter. |
