Our credit scores are very, very important pieces of information…but could they be wrong? A recent Federal Trade Commission study has found that that 5% of consumers have mistakes on their credit reports.
This study was the first of its kind and was mandated by the government for a very good reason. Your credit score determines the ease with which you can do things like make large purchases and take out loans.
With inaccurate information being reported, your financial standing could be at risk. For this reason, and a few others, the FTC’s newest study is very importnat.
Setting a Precedent for Credit Reports
One in five consumers has had an error on at least one of their three credit reports. Although those errors were corrected, that’s still a troubling statistic when it comes to everyday Americans and their finances. With false information being reported by the nation’s credit reporting agencies (or CRAs for short), your financial situation could wrongly be put in dire straits.
Of course, there are ways to go about fixing errors on your credit report, but only if you discover the problem in a timely manner. Not every individual checks out their credit information on a regular basis, and the FTC’s findings suggest that this could be a big part of the problem.
This is the first study of its kind, as it looked at all the parties involved in the credit reporting process. This includes consumers, lenders, the Fair Isaac Corporation that creates your credit scores, and the nation’s CRAs (the “big three” are Experian, EquiFax, and TransUnion).
Every single consumer is able to check their score once a year for free, and is encouraged to do so using www.annualcreditreport.com.
So if you do find an error on your credit report, how can you fix it and improve your score?
Fixing Credit Mistakes
Roughly a quarter of consumers were shown to have an error on their credit report that negatively affected their overall score. This means that there’s a significant chance that you could have mistakes on your report.
Your next major purchase could be seriously sidelined if you’ve got mistakes on your credit report. Charles Harwood of the FTC’s Bureau of Consumer Protection elaborates:
“Your credit report has information about your finances and your bill-paying history, so it’s important to make sure that it’s accurate.”
The good news is that if you do find a problem with your credit report, it’s relatively easy to get things fixed. You’ll simply need to get in touch with the CRA whose report has the mistakes, and that CRA should be able to work with you to resolve the issue.
But the FTC’s study isn’t all bad news. Out of the consumers that did speak with credit reporting agencies to get their false scores fixed up, about one in 10 saw a positive change on their credit score.
One in 20 saw a maximum change of 25 points or more, while one lucky individual in 250 got a bonus of 100 points.
Check your credit score regularly, and you might even want to think about signing up with an identity theft protection service to make sure that your credit information is kept safe, secure, and accurate.
Just make sure you always read the fine print because many credit reporting sites charge hidden fees. Watch our exclusive video on online credit report scams.
What steps do you take to keep your credit score under control? Let us know in the comments!