If you’re looking to take a loan, lease a car or negotiate a mortgage, you won’t be approved unless you have a good credit score. A credit score is important and people often trust that it has been calculated correctly. But according to research, credit score errors are a lot more common than we think.
What Is A Credit Score?
A credit score is a number that represents credit worthiness, or the likeliness that a person can be counted on to pay the bills. The score is a statistical analysis that takes debt into account. It’s included in a credit report that is calculated by one of three major credit bureaus.
Experian, TransUnion and Equifax are the three major bureaus, each with their own system for calculating credit scores. All three companies provide one free credit report each year. If you’ve already used your free copy for the year, the bureaus will provide additional reports for a fee.
Your credit score can also be found on certain sites. For example, FreeCreditReport provides an Experian score, and CreditKarma provides an Equifax and TransUnion score. Your best bet is to get all three scores and compare them.
Be careful to watch out for scams related to credit scores or credit repair. Don’t give your social security number out unless the site is verified. Basically, don’t let people take advantage of you.
The Truth About Your Credit Score
Common credit score errors often go unnoticed when a credit report isn’t carefully reviewed. Research shows that if an error is found, reported, and corrected, many consumers might be offered a lower interest rate. It’s important to realize that a bad score could seriously affect your financial health.
A Federal Trade Commission survey estimates that 26 percent of people deal with credit score errors in the automotive industry. The survey included 1001 people, with 262 reporting an error on at least one of the three bureau reports.
Out of the 262 who reported an error, 206 had their score modified after the error was found and investigated. Following that error modification, 129 consumers, or 13 percent of total participants, received a different credit score altogether.
Out of 1001 participants, 52 consumers experienced a meaningful decrease in their credit risk tier. This means that these individuals were more likely to be offered a lower interest rate. For those 262 individuals who discovered and reported an error, 20 percent had a meaningful increase in their score.
Credit score errors can be obvious at times, or they can be difficult to catch. A few examples of credit score errors include payments that were incorrectly cited as late, or debts that have been paid but were left in collections.
How to Dispute Credit Score Errors
Here’s a few tips for disputing credit report errors:
- Keep financial records. Make sure you have information about your loans, transactions, debts, etc.
- Review all three of your credit score reports carefully.
- File a dispute with the creditor and/or bureau if you notice an issue. In some cases, it may be best to contact both companies in order to speed up the process.
- Be sure to provide a detailed explanation with evidence included when filing a dispute. Some financial experts urge consumers to send a dispute in the mail if the online form doesn’t provide enough space to thoroughly explain the situation.
- If you don’t hear back in about a month, follow up. After 30 – 45 days, the bureau should have investigated the claim and provided an updated report once they spoke with the creditor. If the dispute was resolved, you should receive a new copy of your credit report for free.
- If the dispute has not been resolved in your favor, you can file a complaint with the Consumer Financial Protection Bureau, the state Department of Consumer Affairs and/or the state Attorney General.
“With the credit bureaus, about 70 percent of disputes are resolved within 14 days,” says Norm Magnuson, Vice President of Public Affairs at the Consumer Data Industry Association.
Credit health is more important than you think. After you’ve disputed the mistakes on your credit report, you have the right to file a lawsuit. Click here for a free case report review.
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