Credit report errors are a chronic problem made worse by the pandemic, and complaints about mistakes by the credit bureaus are at an all-time high—up 86% over the last year. To protect yourself, make sure you’re checking your credit reports every three months—especially if you plan to apply for any loans or finance a big purchase.
What’s going on?
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To put it simply, the three big credit reporting agencies (Equifax, Experian and TransUnion) serve the interests of banks and other lenders, not the individual consumer. For that reason, credit report errors were already a problem, as Aaron Klein, policy director at the Brookings Institution, explains to Consumer Reports:
“Credit bureaus are paid by banks and loan providers to produce reports, so their incentive is to produce large volumes of data quickly. Making the reports more accurate would be expensive and time-consuming, although it would benefit consumers.”
Unfortunately, the issue has only gotten worse amid the pandemic, as mortgage loan and student loan forbearance mix-ups have created even more errors in credit reports.
To make matters worse, these errors are not easy to fix, and attempting to do so can require a lot of wrangling with a given agency. It’s a problem that President Biden wants to fix by transforming the credit agencies so they’re a more transparent, public directory managed by the Consumer Financial Protection Bureau.
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How unfixed mistakes can hurt you
Mistakes can lower your credit score, which, in turn, limits your ability to qualify for financing or loans, especially those that offer decent interest rates. Common mistakes include repaid loans that appear as unpaid, incorrect personal information, and debts erroneously reported as being in collections.
And, as mentioned, recently some lenders have reported federally-backed mortgage and student loan borrowers as delinquent despite the moratorium on payments created through various COVID relief plans. For these reasons, you’ll want to be increasingly vigilant, and check your credit reports on a regular basis.
How can I check my credit report?
You can request free credit reports from each of the three credit bureaus on annualcreditreport.com (normally you only get one free report every year, but a special pandemic-related provision allows you to get them for free, every week, through the end of April 2022).
You will be asked some financial questions to verify your identity, so you’ll want to have your financial records at your fingertips. When you receive the report, go through it line-by-line. Look for errors, and double-check it includes accurate personal information, as simple typos are surprisingly common.
How can I dispute an error?
To avoid generating yet more errors, your best bet is to write a letter about the discrepancy to the relevant bureau, preferably via certified mail, with return receipt requested. (The CFIB has letter templates that you can use, here). Make sure to include copies of documents that support your complaint, such as receipts or payment records. Typically, credit bureaus must respond to complaints within 30 to 45 days, but this too has dragged on with the pandemic.
How often should I check my credit reports?
Since you can check your credit score for free every week without hurting your credit, it’s a good idea to do so regularly. At an absolute minimum, you should do it once a year. It’s commonly recommended to check your credit credit quarterly, if not monthly—especially if you plan to apply for financing or loans in 2021.