Your credit report is your permanent record of financial responsibly—in essence, how well, or, uh, not so well, you manage your credit.
It not only contains information regarding your credit cards, mortgage, car and school loans and payment history, but it also indicates whether you’ve filed for Chapter 7 bankruptcy in the last decade, if there are court judgments against you, and who’s asked to view your report. (That can include everyone from credit card issuers to potential employers and landlords.)
So, it’s important you know what’s on your credit report, and that everything on it is 100 percent accurate. A whopping one in four people have already discovered potentially score-damaging errors. Here’s what to do if you find yourself in that 25 percent.
First, Some Background
To eyeball your report, you obviously need to get your hands on a copy. You can do that for free once every 12 months from each of the three credit bureaus—Equifax, Experian and TransUnion—by visiting AnnualCreditReport.com. (You may not want to order all three at once, since they’re similar, but space them out throughout the year.)
With your report in hand, scan for mistakes. According to the Consumer Financial Protection Bureau, the most common fall into four categories: identity, account status, data/processing, and balance errors.
Identity errors are issues with your name, address and/or phone number, or when another person’s stats appear on your report because you have similar names or you’re the victim of identity theft.
Account status errors are mistakes about whether an account is open or closed, payment dates and delinquencies, or if you’ve been misnamed as an account owner.
Data/processing errors can be any accounts showing up that aren’t yours, one account showing up multiple times on your report (with different creditors listed), or negative information that’s more than seven years old. (Most negative payment information should be removed after seven years with the exception of a Chapter 7 bankruptcy or tax liens, which can remain on your report for 10.)
Finally, as you can probably guess, balance errors will show incorrect account balances.
Okay, Now What?
Spotted an error? Then it’s time to notify the credit reporting agency, along with documentation backing up your claim. The FTC recommends sending copies—not originals—via certified mail and requesting a return receipt for your records. (Try this handy sample letter.)
You’ll also want to notify whoever provided the incorrect info, like your credit card company or bank, and include the same documentation. (The FTC’s dispute letter can make this task easier, too.)
According to MyFICO.com, you can expect the issue to be resolved within 30 to 90 days.
Scrubbing your credit report of mistakes ensures that potential lenders, employers and landlords get an accurate picture of your financial management capabilities. Plus, checking this (totally free!) to-do off your list at least once a year provides an opportunity to take swift action if there’s fraudulent information on your report before it spirals out of control. And if there’s any damaging information on your report that’s inaccurate or out-of-date, getting it removed can also help to improve your credit score.