How to Dispute a Credit Report Error: A Primer

2020-09-15T08:34:04-07:00September 11th, 2020|Credit & Debt|

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How to Dispute a Credit Report Error: A Primer

Studies show that credit reporting agencies make mistakes that impact consumer credit scores – and it happens all the time.

The Federal Trade Commission has the proof, with a study showing 26% of Americans having at least one error on their credit report which could negatively impact their credit score. [1]

That’s not a good scenario, as credit report errors that lead to lower credit scores can stop consumers from getting the loans they need to cover big ticket items like homes, cars, and loan consolidation debt. Or, at the very least, a lower credit score can trigger higher interest rates that make loans or credit cards more expensive to use (lenders may approve a loan or credit card request from a borrower with a lower credit score, but will only offer the loan or credit with a higher interest rate attached to reduce their risk.)

RELATED: How to Dispute a Credit Card Charge

The Problem – and Solution – To Credit Report Errors

That’s where correcting credit report errors comes into play for Main Street Americans looking for a loan or a credit card.

“Credit scores can be confusing, especially when you think it’s better than what is showing on your screen,” says Ethan Taub, chief executive officer at Goalry, a personal financial goal-setting platform in Newport Beach, Cal. “You may have been rejected for a loan or credit card when you know you credit is not bad enough to be rejected.”

Credit reporting errors not only occur regularly, they come in multiple forms.

“The most frequent errors that occur at credit bureaus when they attempt to combine information from multiple sources into a single record about an individual,” says Kevin Haney, president of Growing Family Benefits, in New York, N.Y. “It amounts to educated guesswork.”

RELATED: Hard vs Soft Inquiries on Your Credit Report

For example, identifying information rarely matches 100% accuracy on a credit report, because people move, change names, use nicknames (like “Patty” instead of “Patricia), and use generation codes (like “Junior” or “Senior”). Plus, people make data entry errors all the time when typing up loans, credit and other official consumer financial documents.

These data anomalies lead to two different credit scoring errors when matching identity information together, according to Haney.

1. Merged files contain data from two people.
2. Fragmented files separate information from one person into multiple. records.

“Other mistakes occur at the source: the bank or collection agency reporting the information,” he says. “For example, an account that belongs to an individual could show a delinquency action that is inaccurate,” Haney adds. “When that happens, consumers have the right to dispute anything on their credit report and should do so as the mistake is uncovered.”

RELATED: Money Mistakes That Can Cripple a Credit Score

Pay High Interest Rate Debt First

How you prioritize your personal debt also factors into any minimum payment scenarios.

“I prioritize most of my debts in order of which one has the highest interest rate and the lowest balance, to pay those debts off first,” Bringle says. “Essentially, I balance between the debt avalanche method (where you pay the highest interest debt first) and the debt snowball method (where you pay the lowest balance off first). I do this because I can benefit from saving the most on interest while also staying motivated by paying a lower balance off first, then snowballing my payments towards other debts.”

As for the order of personal debt paydowns, Bringle ranks them in terms of priority (meaning you should pay these debts off first, ideally with paying more than the minimum monthly payment.)

1) High-interest, consumer debt (like credit cards) or higher-interest personal loans or car loans
2) Private student loans, which often come with higher interest rates or variable interest rates, followed by
3) Federal student loans, which typically have more protections and lower interest rates. Right now, federal student loans have 0% interest through December 31, 2020.

Medical debt is a different breed than a personal loan or credit cards, and should be treated differently when it comes to debt elimination.
“Most medical debt does not accrue interest, and many medical providers offer their own payment plans,” Bringle adds. “If you work directly with your provider and can make at least the minimum monthly payments towards medical debt,
focus on paying off other, higher-cost debts first.”

Setting the Record Straight

The first step in fixing a credit report error is finding those credit report errors.

That’s going to take some due diligence on your part, as most credit scoring mistakes are uncovered by people checking their own credit reports. You can hire a credit repair to do the leg work for you, but that can be expensive, with monthly rates up to $100 or month or so (depending on the credit services purchased) to get the best results.

To do the job yourself, get a free copy of your annual report from Annualcreditreport.com, or at the main websites of the three primary credit reporting agencies (Equifax, Transunion, and Experian.) You’re entitled to one free copy of your credit report from each of the above entities, and you can get one in a matter of minutes by asking online.

When you do find a credit reporting error, start taking the steps to dispute it. That process starts by contacting the credit reporting agency where you found the error.

Here’s the information you need to file a dispute with the three major credit bureaus:

Transunion. Credit Bureaus Dispute Information TransUnion LLC Consumer
Dispute Center P.O. Box 2000 Chester, PA 19016
Online:  https://dispute.transunion.com
Phone: 800-916-8800 – 8am-11pm EST

Experian. Experian Dispute P.O. Box 4500 Allen, TX 75013
Online: https://www.experian.com/consumer/upload/
Phone: (714) 830-7000

Equifax. Equifax Information Services LLC P.O. Box 740256 Atlanta, GA 30374
Online:  https://www.equifax.com/personal/disputes
Phone: (800) 846-5279

RELATED: How Do Credit Utilization and DTI Ratio Affect My Credit Score?

Filing the Dispute

Take these steps in filing a dispute to generate the best outcomes.

Don’t file online

“It’s really not a good idea to dispute credit report errors online,” says Shiva Bhaskar, a credit repair attorney and founder of Tier One Credit in Torrance, Cal. “Online disputing through Credit Karma and other platforms limits your options (i.e. the reasons for the dispute), and can restrict your ability to share documents which are relevant to your dispute. Also, you can end up waiving some of your legal rights, such as to be informed of dispute results by mail.”

Bhaskar suggest disputing by certified mail, with the credit bureaus by using the contact information listed above.

Be specific.

When you do file your credit dispute, be specific as to what you believe is wrong, and provide documentation. “Too many dispute letters are very generic,” Bhaskar says. “You need to explain the mistakes on your reports very clearly. Include copies of your credit reports, and documentation of the error if you have any. For example, if you were marked as having paid late (but never paid late), include account statements and the credit report where you were marked late.”

Be persistent.

“If an error is not corrected by credit bureaus, write to the debt collector or credit who reported the incorrect information,” Bhaskar adds. “Provide them with documentation of the error. Often, errors are more likely to be corrected after contacting the reporting party directly.”

Hire an attorney if the errors are not corrected.

“Attorney’s fees in these cases are typically paid by the credit bureaus and collector / creditor, so most attorneys will take the case on contingency (if there is grounds for a lawsuit),” Bhaskar adds. “In that case, there’s no reason not to present your case to a lawyer.”

Typically, you’ll need to be able to show that the error is damaging your credit in some way, to be able to sue. If you can show actual damages (such as being denied for a loan), you can recover more in a potential lawsuit,” he says.

RELATED: How Do Personal Loans Affect Your Credit Scores?

Following Through

Make sure to keep track of your dispute file (it’s easy to do that with the three credit reporting agencies and any third- party credit services provider) and follow up as needed. usually, it takes 30 days or so to resolve a credit dispute case.

“These things are rarely a one and done process,” says Nishank Khanna, chief marketing officer at Clarify Capital in New York, N.Y. “Make sure to follow up on the status of your dispute and maintain communication until the error has been corrected.”

Assuming that requesting a change to your credit report is enough to resolve the problem is a common mistake people make. “The end result of no-follow through can often be a long-standing black mark that never belonged there in the first place,” Khanna says.

[1] https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf

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Brian O'Connell
Brian O’Connell

Brian O'Connell has been a finance writer at TheStreet, TheBalance, LendingTree, CBS, CNBC, WSJ, US News and others, where he shares his expertise in personal finance, credit and debt. A published author and former trader, his byline has appeared in dozens of top-tier national publications.

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