Credit - illustration by almagam

Study by FTC

Federal Trade Commission (FTC) recently studied errors in credit reports.

More than 1 out of 4 consumers (262 of 1,001) found errors on their credit reports that could affect their credit scores, such as a credit-card account they didn’t have or a late payment that they didn’t believe was late.

When these people disputed the information, four out of five saw at least one credit-report change. This was recognition that some data was indeed wrong or could not be verified. One out of 10 saw a change in their credit score after their credit report was updated.

The study shows how much can go wrong when you collect important information on more than 200 million consumers. Remember, it is up to you to spot problems and address them. And you really want to make sure everything is accurate, especially before you buy a car, get auto insurance or apply for a job.

Your credit report has information about your finances and your bill-paying history, so it’s important to make sure it’s accurate“, said Charles Harwood, Acting Director of the FTC’s Bureau of Consumer Protection.

What Can You Do To Fix Errors?

First, you must make sure you keep track of the information in your credit report.

The law entitles you to one free copy of your credit report from each of the three nationwide credit reporting companies every 12 months. Just go to Check information every fourth month, by spreading your requests over the year. As an example, you can look up your Experian report in April, Equifax in August, and TransUnion in December.

FTC has a video for consumers on how to get a free credit report.

Secondly, if you notice something wrong, contact the credit reporting company and business providing the information to correct the error. Support your request with documents and more information, if possible.

Errors often occur because the report is incomplete, or contains information about somebody else. Mixed-up Social Security Numbers or names are usually behind this. Identity theft is also a possible explanation.

The Credit System

The credit scoring systems in U.S. are in place to determine how big of a risk you are for credit cards, auto loans, and mortgages. Others are also using credit scores to decide whether to approve you for a job or a service and on what terms.

A higher credit score means you are likely less of a risk, and in turn, means you will be more likely to get the service, credit or insurance – and pay less for it.

This is how important your credit report is.