Why Is Keeping on Top of Your Credit Report Vital?

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“The real problem with credit reports is the astounding number of errors,” says Brookings Institute fellow, Aaron Klein. And often, these errors weigh against an individual’s credibility, making them seem like a bigger risk than they actually are.

According to the Federal Trade Commission, one in five people has an error on at least one of their credit reports. These can either affect their ability to obtain credit or result in more expensive credit terms. How can the average American stay on top of these reports and ensure that they reflect the actual amounts owed?

Annual Credit Reports are Free

Obtaining updated credit reports doesn’t have to be expensive. You can obtain a free copy every year from each of the three major credit reporting companies on AnnualCreditReport.com. Rather than obtaining all three at once, why not space them out so you can conduct regular reviews? By doing so, you can correct errors at no cost and ensure that all three companies have the same information.

Errors that Hurt Your Pocket

To ensure your credit reports are error-free, go through all vital information (including personal information) with a fine-toothed comb, taking the time you need and finding a nice, quiet spot in which to work in a focused manner. Some of the most costly errors can include accounts that are incorrectly listed as delinquent, having the same debt reported more than once, and being reported as an account owner when you are merely authorized to use it. When you spot an error, contact the credit recording company and the institution that provided them with the erroneous information. When doing so, gather all the documentation you need to prove an error has been made.

Who is Making Mistakes?

The FTC reports that there are three main reasons why credit reports may be inaccurate. First, data furnishers may provide incorrect information to credit reporting agencies. Secondly, the data furnished may be correct, but it may be assigned to the wrong person. Finally, a credit reporting agency may send information to one person that pertains to another.

Seeking Help when Required

In some cases, seeking the help of a company specializing in credit repair may be useful. Bear in mind that sometimes, correcting a credit report is not as easy as it should be. This is the case, for instance, if despite informing the credit reporting agency of the amendment to be made, the corrected report does not reflect your instructions. This could easily happen, say in the case of a wrong balance. Instead of simply correcting the balance, the credit reporting agency might just remove the account if they cannot confirm the existence of the account with the financial institution you have stipulated. At other times, you may file a dispute yet find that no correction has been made at all. If you find that you are repeatedly knocking at the door of any of the three major credit reporting agencies, and that your report still fails to accurately represent your financial position, you may wish to speed the process up with professional help.

Studying your credit reports regularly is vital, because these reports are used for everything from granting insurance to providing telecommunications services. A wrong name or status could change everything, or at least make services you contract more expensive than they should be. If you spot any error (even one that you cannot see affecting your financial well-being), ensure that both the data furnishers and the credit reporting agency are aware of it. Check to see that amendments have been made accurately and if there are various problems with a credit report, professional help can pave the way to a better credit score.