These common errors could be hurting your credit score

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One in four credit reports are inaccurate. You heard that right: According to a recent federal study, about one in five Americans have some kind of error on their reports, ranging from incorrect phone numbers and outdated addresses to erroneously inflated debt and credit inquiries that never happened.

While many of these errors are clerical and may not impact your score, some do. If you end up with a low credit score by mistake, that can make it tough to apply for new types of credit, including student loans, auto loans, mortgages, and refinance loans. Having accurate information in your credit report means you are always getting the interest rates and credit limit you deserve. Here’s how to detect credit report errors and get them fixed fast. 

Common credit report errors to look out for

The following are four of the most common errors found on credit reports. 

Inaccurate information

Misspelled names, outdated employers, or old phone numbers can all show up on your report, Bruce McClary, senior VP of communications for the National Foundation for Credit Counseling, told Earnest in an interview.

These kinds of inaccuracies are the most common errors credit reporting agencies make, but are also the quickest and easiest to fix, he says. They also don’t often impact your credit score. But say you apply for a new credit account, like a new student loan or refinance. The lender pulls your report and sees contradictory or incomplete information. That could really complicate your application, McClary warns. For that reason, it’s best to dispute errors like these with your credit reporting company right away. 

Duplicate accounts

Sometimes accounts are listed twice by accident. If you owe money, your credit report could show double the debt, lowering your credit score. You could be denied new credit, or forced to pay a higher interest rate that doesn’t reflect your actual creditworthiness. 

Activity you don’t recognize

Maybe you spot a new account that you didn’t open, or some hard inquiries you never made. “That could be an indicator that someone is out there shopping with your personal information,” McClary says. McClary himself has been a victim of identity theft—a bad actor used old contact info to open a cell phone account in his name and ran up thousands of dollars in charges. Fortunately, McClary spotted the activity on his credit report and was able to dispute the charges and shut it down, sparing his credit score from damage.

Unfamiliar activity could also signal that someone else’s account (potentially someone with a similar name) is mistakenly appearing on your credit report. Regardless, it’s worth addressing ASAP.

Incorrect payment history or account status

Sometimes a creditor will incorrectly list a late payment. If you know you paid your bill on time, that’s worth disputing. Similarly, you may have a closed credit card listed as open, or an open account that never got reported. Both could impact your credit utilization ratio (the ratio of your debt to your available credit) which affects your credit score. In turn, that can make it difficult to qualify for new loans or lower interest rates on your existing loans.

How to order a free copy of your credit report

There are three main credit bureaus: Experian, Equifax, and TransUnion. Every week, you can get one free credit report from each through annualcreditreport.com (the name is a misnomer; credit reports used to only be available for free once per year but this was expanded during the COVID-19 pandemic). Usually you can order your report online, though you may have to order via phone or certified mail if a bureau has flagged your account for suspicious activity, says McClary.

Jessica Francese, a consumer credit counselor with Debt Management Credit Counseling Corp., recommends cycling through the three bureaus each year, reviewing your credit history every three to four months. She especially recommends checking your reports prior to applying for a student loan or new credit card, buying a house, or making any other big purchase.

How to check your credit report for errors

There are a number of paid services that claim to monitor credit or track down errors for you, but most are a waste of money, says Francese.

She says many of those services are inaccurate, particularly when it comes to credit score. (Your credit score isn’t typically shown on your credit report, but you can check it separately through each of the credit bureaus.) “Each of [these score-checking services] has their own different scoring system, so the true FICO score gets lost,” Francese says. Plus, she says, you can find everything you need to check your score (and your credit report) for free online. 

First, read through your credit report and make sure you recognize all the phone numbers, addresses, accounts, and other information on your credit report. Ensure everything is spelled correctly and up to date. (It’s okay if the report has an old phone number or address as long as the right ones are listed as current, says McClary.)

Then, look at your debts and inquiries. Make sure you recognize the hard inquiries. Check that each of the listed account balances is correct and that there are no duplicates.

Stumped by a term? Each of the major credit bureaus has resources online that tell you how to read your credit report, what all the financial vocabulary means, and what items could be negatively impacting your score:

• Experian

• Equifax

• TransUnion

How to dispute credit report errors

When you spot an error, your first step in the dispute process is to gather documentation, McClary advises. Some commonly accepted documents include:

• A copy of a driver’s license or passport showing your name

• A court document showing proof of a bankruptcy schedule

• A utility bill or other verification of your current address

• A credit card statement or notice you received that shows you paid off a debt

Then, Francese recommends contacting the credit bureau as well as the organization involved in the error about the disputed item. You can usually do this through an online dispute, she says, but when it comes to serious errors like incorrect date of birth or social security numbers, you may have to submit your disputed information and documentation the old fashioned way.

“If [the bureaus] think it’s something fishy, you have to do things by mail,” she warns. “That’s when a lot of people throw their hands in the air and say it’s too tedious, but taking the time to fix those errors is definitely worth it.” (To speed things up, the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) each provide a sample letter for mailed dispute letters.)

After you file a dispute, the credit bureau has 30 days to investigate, at which point they’ll get back to you with their dispute results and a free updated credit report that reflects any changes, says McClary. If the bureau agrees that a detail is in error, they’ll fix it for you for free, as required by the Fair Credit Reporting Act. If you suspect fraud, you’ll also be able to freeze your credit to keep other bad actors from pulling your report or submitting hard inquiries on your behalf. 

McClary adds that sometimes that first dispute gets denied, but that doesn’t mean you’ve lost.

“Don’t think that’s the end of the road. You can be persistent, and you can dispute it again. Maybe they don’t have all the information they need. If there’s any chance that the incorrect information could cause damage to your credit score or prevent you from qualifying for financing when you need it most, you’re doing yourself a favor by putting in the effort.”

How to benefit from your improved credit report 

Having a strong credit report is important any time you need to take out new credit, whether that’s a private student loan¹ or a new credit card. But strong credit can also help you manage your existing debt—and even lower the monthly payments on loans you already have.   If you’ve been able to boost your credit by fixing credit reporting errors, you might be able to leverage that improved score to refinance your student loans². If you qualify for a lower rate, refinancing could help you save money loans and even get out of debt faster³. Want to see if refinancing could work for you? Check out our eligibility requirements, then get a free rate estimate. It only takes three minutes, and it won’t impact your credit.  

Disclaimer: The opinions expressed by the interview subjects are not necessarily those of Earnest. This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 Before applying for private student loans, it’s best to maximize your other sources of financial aid first.  It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grants, and work-study opportunities.  2) Next, fill out a FAFSA(R) form to apply for federal student loans.  Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if you're struggling with your payments.  3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2.  For more information, visit the Department of Education website at https://studentaid.gov/.

2 Please note that you will lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans, Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan.

3 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.