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26 May 2011

Common Credit Report Errors

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Tristan Powys (Credit Manager) @ Lucid Living

In 2004, U.S. PIRG did a survey of consumer credit report errors and found that 1 in 4 credit reports had “serious errors” that could result in denial of credit.

Also, 54% contained incorrect personal demographic information, 22% had the same mortgage or loan listed twice, and all told, 79% of the reports surveyed had a mistake.

You read that correctly: 79% of credit reports had an error of some kind. That’s absolutely stunning.

Unfortunately the situation with South African credit bureaus is worse. Statistics release by the Credit Ombud (Q4, 2010) show that 88% of credit reports had an error of some kind. (See full story: 88% of Credit Bureau Information is Incorrect)

When I first read those statistics, I didn’t believe it. But having reviewed my credit report many times since then, I’ve discovered my fair share of errors. I’ve discovered someone else’s credit card listed on my credit report. I’ve found incorrect personal information. The worst was seeing that I had a second Identity Number listed with the credit bureau.

That’s why it’s so important to review your credit report regularly. Get yours now: Credit Pulse Report.

When you do, here are common errors you should look for:

1. Erroneous accounts.

When you review the accounts listed, be sure to double-check that each one is actually yours. I discovered an erroneous account the very first time I looked at my credit report.

You should also make sure all of your accounts are listed. It’s easier to see an error than it is to catch an omission, so double-check that each of your accounts is listed. You want every “account in good standing” you’re entitled to. This boosts that all important credit score.

2. Inaccurate account information.

Double-check that the information listed for each account is accurate. For example, you want the current balance to be accurate because credit utilization is an important factor in your credit score.

Other important account details to check include the date you opened the account (length of credit is important) as well as the type of account (having different types of credit is good).

3. Outdated information.

The credit bureaus rely on companies to report your information. If you move, you may discover that the credit bureaus still have your old address if your creditors were neglegent in reporting the update of information. This may result in more expensive home and vehicle insurance premiums – i.e. your previous address may be a higher insurance risk.

If a loan is sold from one company to another (common when credit providers sell bad debts to debt collection companies), the original company may neglect to report that the account has since been paid-up. This will reflect as a “default payment” or “delinquent account” and drastically lower your credit score.

There are numerous similar scenarios in which things can be listed twice or old data is never being updated. Unfortunately, it falls on you to catch and correct it.

4. Default or delinquent payments.

Having an incorrect default (non-payment) on your account is another common error. This can be devastating to your credit rating.

Your credit score is supposed to be a measurement of how likely you are to default on a debt, known as default risk. As you can imagine, defaulting on a debt is a pretty big indicator that you’re likely to default on another one. That’s why making sure this is correct is absolutely paramount.

Default payments can be incorrectly attributed to you or, in the event you have one, ensure that it is not dated incorrectly. Since they fall off your credit report after two years, it benefits you to have the date recorded accurately.

5. Erroneous ID.

Finally, there’s my case of an erroneous ID Number. You’d think the credit bureaus would have some error checking built in because one person should not have two ID Numbers, but apparently they don’t. After taking this up with the credit bureau in question it transpired that this was the result of Identity Fraud.

Have you seen some crazy credit report errors?

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