A study by the Federal Trade Commission (FTC) has found that one in four consumers saw mistakes on their credit report, and those mistakes could be costing them money.
The study found that 25% of consumers surveyed found mistakes on at least one of their reports from the three major credit bureaus – Experian, TransUnion and Equifax. Mistakes on credit reports can be anything from a misspelled name to an open account being listed as closed or payments not being correctly recorded. Depending on the error, it can lead to lower credit scores, which means higher interest rates on mortgages and insurance. It can also mean being turned down for lines of credit, or being granted less favorable terms on all types of loans.
Credit reports contain your personal information such as name, address, and Social Security number, as well as data about all your credit accounts and loans, including student loans, mortgages, auto loans and other lines of credit. The reports contain payment history, length of credit, types of credit used, and the debt-to-credit ratio. This information is used to formulate a credit score of between 300 and 850 for every person on file with a credit bureau.
Study asked people to find and correct mistakes
The FTC study asked a representative sampling of 1,001 people to check their credit reports for mistakes and dispute possible mistakes they found. Participants reviewed almost 2,968 credit reports and followed up on misinformation that could damage their credit scores. They were encouraged to use the Fair Credit Reporting Act (FCRA) process to address mistakes on their credit reports.
These were the findings:
- One out of four participants found errors on their credit reports
- One out of five successfully had an error corrected on at least one report after disputing it
- Four out of five people who disputed errors had their credit reports modified in some way
- A little over one in ten had credit scores changed as a result of getting errors corrected
- About one in twenty had a credit score change of more than 25 points after disputing mistakes
- And one person found a number of errors and had their credit score change by more than 100 points as a result of correcting the misinformation
The FTC said the study reinforced the importance of checking your credit reports annually for accuracy, and taking the time to challenge any information that is not right. Check your credit report now.