We here at WalletPop keep telling you how important your credit score is, but what's a hardworking American to do if there's a mistake on that all-important score -- one that could be costing them valuable points that could translate into a better rate on a mortgage, car loan or credit card? WalletPop interviewed several, very average Americans who found and confronted a credit report mistake. They shared their stories -- and their solutions -- so you won't find yourself in the same situation.
When artist Joe Bagley checked his credit score in January, he said he was "shocked" by the results. Why? "One of the reports said we had currently used up more than 45% of our available credit," he explains, adding that he knew he only had about $2,000 in credit card debt, a balance he was actively paying down.
Panicked, Bagley's first thought was that someone had stolen one of his cards and run up a huge balance. A little digging into the credit report soon solved the mystery: Bagley's highest-limit card, one with a $15,000 credit limit, was listed on the report as having a limit of zero, seriously skewing his overall utilization ratio. He says he contacted all three credit bureaus online and asked that they fix the problem, which he estimates took about three weeks to resolve.
Looking back, Bagley thinks this mistake might have cost him the chance to get the best possible rate when he bought a used car a few years before that. He wound up paying around 10% in interest, which seemed high to him at the time. Upon reflection, he thinks that credit report mistake could have cost him thousands of dollars in extra interest.
Bagley's hunch could be right, says Barry Paperno, consumer operations manager for Fair Isaac Corporation (otherwise known as FICO), the company that takes information from the three credit bureaus and calculates your credit score. "If [the credit limit] comes in lower than it should be or if there's no limit reported, what that can do is have the effect of raising the utilization percentage," Paperno says. For someone with a good credit score in the high 700s, this seemingly minor mistake can drop their score by as much as 45 points, he adds.
Other types of credit problems can put an even bigger dent in your score, Paperno says. A late payment -- even an incorrectly reported one -- can sink your score by as much as 100 points. For this reason, it's crucial to check your score regularly. If you don't want to pay for your score, you can get one free each year from each of the three bureaus through annualcreditreport.com.
It just takes one
Anecdotal reports indicate that getting such errors reversed has gotten easier now that all three reporting bureaus have online dispute-resolution forms. For Julie Sue Auslander, president of a magazine subscription services company who wrestled with a credit report mistake nearly a decade ago, the process was much more arduous: A medical imaging company sent Auslander's unpaid balance to collections while the charge was being disputed by her insurance company. Unbeknownst to Auslander, the imaging company never notified the credit bureaus when her insurance company did pay, leaving a black mark on her report. Then, to make matters worse, the imaging company went out of business.
Auslander only found out about this three years later, when she was denied a mortgage refinance that would have substantially lowered her interest rate. What followed next was a frustrating round-robin of letters to the credit bureaus trying to get the erroneous information removed. "It's like you're guilty until proven innocent. They said I needed to provide them with documentation that this claim was erroneous and proof that I've spoken to the person who lodged the claim. Providing them with proof of payment from the insurance company wasn't enough," she says. When she wrote back and explained that the company was out of business and she had no way to reach anyone there, these follow-up letters were ignored.
Finally, after being turned down for an office lease in 2005 due to the same mistake, Auslander switched tactics and wrote to the Federal Trade Commission, the agency that oversees the Fair Credit Reporting Act, looking for guidance. Only with its help was she able to get the mistake corrected, a full seven years after her ordeal began.
Lots of little mistakes
For some people, it's not one big, glaring error that compromises their credit score, but rather a host of smaller mistakes. When product engineer Rob Patterson pulled his credit reports in anticipation of buying a house back in 2007, he was confronted with so many errors and inconsistencies he had to build a spreadsheet to keep track of them all.
"It was overwhelming because each of the credit reports had pages upon pages listing all your accounts from the past. Just trying to compare them side to side was hard," Patterson says. In total, he estimates there were around 15 errors scattered throughout the trio of reports. "We would have an account, and the three bureaus showed different balances and credit amounts," he describes. In addition, some of the reports showed closed accounts as still open, a problem that could make him look like a greater credit risk than he was.
Making matters worse, Patterson says, "It wasn't real clear how to dispute the reports. [Each agency] had a credit dispute form, and it was very basic, and I was afraid when I filled out this form, there wouldn't be enough explanation behind the problem." Not once, he adds, did he receive any kind of reply back from any of the bureaus, leaving him effectively in the dark about his efforts.
Patterson monitored his reports and saw his score rise by about 150 points over the next two months. He says about 90% of the errors were corrected, but he remained at a loss as to why the other errors hadn't been removed -- or where to proceed from there. He admits that the long, daunting nature of the project -- it took hours of pulling together paperwork necessary for the dispute forms -- has discouraged him from tackling the remaining errors. "We've considered going back at some point and finally cleaning up everything else. it's just a matter of getting motivated to go through that process again," he says.
As these consumers' stories illustrate, mistakes on your credit report can really burn you. This Bankrate article lays out the how-to basics: You order your credit report and check it for errors. If you find one, you'll need to file a dispute, either by mail or online, with the bureau or bureaus that have the erroneous information. Just remember: Always make copies of anything you send to a credit bureau. Don't send them, say, your only copy of a document that offers proof of payment on a disputed bill.
Finally, it's a good idea to tackle this project long before you plan to make a major purchase such as a house or a car. Give yourself several months' worth of lead time when it comes to dealing with the credit reporting bureaus.
It's your credit score: Make it count for you.
How to fight back against disastrous credit report errors