How to Fix Credit Report Errors - And Why You Should

Reader Question: How common are credit report errors and how would I go about fixing them?

For the benefit of all readers, I'd like to turn yours into a three-part question. Because there are really three things we need to address, in order to make sense of all this. So let's take a look at the following questions:

1. What are credit report errors?

There are basically two types of errors you might encounter on your credit reports -- (1) inaccurate information and (2) accurate information that should have already "expired" from your report.

Inaccurate information might include errors with your name or social security number, or it might include account information that's not yours. For example, if you look at your credit report and see a store credit card for Macy's listed in the accounts section, but you've never opened such an account, then you've got an error that needs to be fixed. It might be a data mix-up, or it could be a sign of identity theft. Either way, it needs to be corrected immediately.

Credit report errors can hurt your overall credit score, because the score is based directly on the information found within your reports. So if an error comes in the form of derogatory information (unpaid bills, collection accounts, bankruptcy, etc.), it can hurt your credit score.

2. How common are credit report errors?

This depends on whom you ask. If you were to ask the three major credit reporting agencies how common these errors were, they would probably say it's rare. But they are hardly unbiased on this subject, now are they? If you asked the folks at Consumer Reports, they would tell you that consumers find approximately 13 million errors on their credit reports. If you asked the U.S. Public Interest Research Group (who conducted a survey into this issue in 2004), you'd be told that 79% of credit reports reviewed had some form of error in them.

Statistics and arguments aside, here's the bottom line on this subject. Credit report errors are common enough that you should be concerned with them, especially if you plan to apply for a mortgage loan in the near future. I recommend that you read your reports once a year, with an eye out for errors. By law, you are entitled to a free yearly report -- so why not use it?

How do I fix errors when I find them?

Thankfully, the process of fixing errors has gotten much easier over the years. There are two reasons for this -- government regulations and the convenience of the Internet. When you dispute errors on your credit report, the reporting agencies (Experian, TransUnion and Equifax) must investigate the dispute in a timely fashion. There are federal laws to enforce this responsibility. If they find that your dispute is legitimate -- or if they are unable to verify the item one way or the other -- they must remove said item from your credit report.

In the past, you had to do this process through the mail. You can still do it that way, if you want, but you can also fix errors on your credit reports by using the online dispute process offered through the credit bureaus website. I usually recommend the online process because it's quicker than using regular mail, and you can log in through the website to check the status of your dispute. For example, here's the TransUnion disputes page where you would initiate such a process. You can easily copy the information into a Word document or a text file, and then print it out for your paper records.

If you would like to mail a letter instead of using the web-based dispute process, you can find a sample dispute letter on our website. You can also find a wealth of information on the FTC website that explains how to fix errors on your credit reports. The FTC is the federal agency that regulates this industry, so you can consider them the authority on such matters.

What you should not do is hire a credit repair company to handle this process for you. They'll charge you hundreds of dollars to do what you can easily do for yourself.