How to Review Your Credit Report for Problems

The task of knowing what’s in your credit reports is a lot easier than some people may lead you to believe. But it does take a little time, some patience, and occasionally persistence. You don’t need to pay anyone to monitor your credit or send you hourly updates on what’s happening in your credit universe. You can do so on your own, and for free in most cases.

You want to keep a close eye on your credit reports for potential problems, because with the large number of items reported daily, errors are not unusual. (The U.S. Government Accountability Office has found that about 25 percent of reports contain errors, and about half of those errors are serious enough to lower your credit score.)

In addition, your credit history is used to make an increasingly large number of decisions about your future, financial and otherwise, from lending to insurance to employment.

To begin, arm yourself with the information in your credit reports, as well as your credit score from FICO, VantageScore, or a bureau. If you have to pick one, the FICO score is still the most widely used by lenders. If you plan to apply for a loan in the near future, ask your lender which report and score it uses, and then get that one.

Although you probably won’t be able to get the same exact score because of multiple versions the lender may have, you can get a snapshot of your credit that is very close to the commercial version actually used. If you can’t find out which score is used, any score will do to establish a benchmark of where your credit report ranks and then to track improvement.

As you study your credit reports, you may be surprised by how many accounts you find. Because your report lists negative information for seven years (longer exceptions, such as government debts and bankruptcy, also exist) and positive information for much longer, you’re likely to see accounts, referred to as trade lines, that you’ve forgotten about, and perhaps even some that you didn’t realize you still had.

Some creditors, like retail stores, don’t close accounts, even if you haven’t used them in years. Your task is to play credit archeologist and sift through the trade lines — current and ancient — and identify errors and inaccuracies.

Here’s what you should look for in particular:

  • Verify that your name, address, birthdate, and Social Security number are correct. Variations on your name are okay. With all the data moving through the financial reporting system, however, a Jr. or Sr. can easily be missed, or confusion over a II or III designation may occur.

  • Look to see whether account activity is being reported correctly. If you see accounts that are familiar but activity that isn’t — such as a late-payment notation when you don’t recall having been late — report that error to the credit bureau. An account you don’t recognize may be a simple misposting of data from someone else’s report, or it may be a sign of something more serious, like identity theft.

  • Look out for accounts from banks or stores with which you’ve never done business. Someone else’s account information may have been added to your credit report because of a misspelled name, a wrong address, or an incorrect Social Security number. Sometimes an account purchase results in a new trade line on your report. Dispute the account using the instructions on your credit report if you aren’t sure about it.

  • Identify and verify any accounts that show negative activity. Negative activity can include anything from a late payment to a charge-off or bankruptcy notation. Make sure that this negative information is accurate. Remember, 25 percent of reports contain errors. Also, some negatives are much more serious than others. For example, a 90-day delinquency is more serious than a 30-day delinquency. Recent negative items are more serious than older ones.

  • Be sure that an account that moved from one source to another is listed as open only once. Bank and store mergers can result in multiple entries for the same account. Multiple entries can make it look like you have excessive amounts of credit available.

  • Look for overdraft protection lines of credit. These lines of credit may be reported to the bureaus even after you close the accounts that the lines were meant to support. Reporting these lines of credit as closed reduces your outstanding credit and can be helpful if you are trying to add new credit.

If you make a correction to your file, the change may not be reflected in your credit report right away if the creditor doesn’t generally report to that credit bureau every month. If you’re in the process of applying for a loan, ask whether your lender offers a rapid rescore product for sale.

Developed by the three major credit bureaus, rapid rescore is essentially an unscheduled update to the information on your credit report. If a recent action (such as closing a card) helps your credit score, then it can be expedited to the bureau as soon as it’s made. The credit bureau can then update your file so that you can get an updated score in days, not weeks.

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