If a journalist makes a factual mistake, a newspaper will publish a correction within a day or two. But if a credit bureau publishes an error about you, the error will affect your credit and remain in place, unchecked.
Thousands of people are reading the newspaper article, and any one of them could notice the mistake and notify the editor. On the other hand, the credit bureaus only have one person looking over their shoulder – you. This lack of oversight has resulted in mistakes being all too common.
In early 2013, the Federal Trade Commission (FTC) published findings on the accuracy of credit reports. Experian, TransUnion and Equifax had recorded errors for one out of four credit reports, which might have impacted credit scores. After the study group pointed out the errors to the erroneous bureaus, one-tenth of consumers received an upward modification in their credit score. Half of those were able to increase their scores by over 25 points, meaning that the errors had damaged their credit enough to affect interest rates and loan applications.
Your credit score is the standard measure for the likelihood you might be late on payments or default. Would-be lenders look at your score to calculate interest rates, how much credit to extend, and ultimately whether to accept your application. Many organizations have a minimum credit rating for specific transactions, and if you fall beneath that minimum, your application will be rejected.
Given the 25% chance that one of the three credit bureaus has misreported one or more of your financial transactions, I am not alone in advising you to check your credit report once per year for errors. Despite this advice, it's pretty common for people to avoid checking their credit as often as they should, especially after defaulting on a loan or falling behind on a bill or two.
If the credit bureaus were some all-powerful, ultimate authority on your self-worth, then maybe I would sympathize. But they can barely get their facts straight!
I wouldn't place a lot of importance on what they think. More important is keeping your report free from errors, which can harm your interest rates and financial outlook.
You have the right to one free credit report per year, which you can access at AnnualCreditReport.com. The system will automatically take you to the three credit bureaus' websites and access your credit history for your review. Be sure to look through all the information and make a note of any accounts or transactions you do not recognize.
Each credit bureau will have a guide to its credit reports, which will take you through the template and teach you how to read it.
If you want to know your credit score, you will be required to pay something. TransUnion is currently offering a free trial for their credit score subscription package. The system will request your credit card information but will not start charging until after the 7-day trial concludes.
If you cash in on the trial, be sure to cancel your subscription as soon as you get all the information you need. The monthly fee is roughly $15 per month, which is outrageous, imho (in my humble opinion). The other bureaus accept small, one-time payments.
If you see any errors on your credit report, read my upcoming article, Credit repair 102, for some bread & butter tips on how to get your report corrected.