Your credit score is based on information on your credit report, a report that reflects how you have handled borrowed money. This number is used by potential lenders to help them decide whether you’re likely to repay the money loan to you. It’s surprising how often there are errors on credit reports, and if you don’t take the time to confirm that your credit reports are accurate, your credit score may be lower than it should be. Let’s look at the impact of credit report errors.
Possible Financial Impact
Some errors on your credit report may have a big financial impact. Errors that bring down your score such as payments shown as late that were paid on time can cause a lender to decline your application. If your application is approved, an unfairly low credit score can cost you hundreds or thousands of dollars in interest due to higher interest rates and fees. On a mortgage, higher interest payments can really add up over the life of a mortgage.
Other Types of Impact
Applications for a loan or a credit card aren’t the only thing that can be impacted by a credit report error. If you’re applying for an apartment lease, the landlord may deny you or ask for a higher deposit because of inaccurate negative items on the report. Insurance companies might charge higher premiums due to errors weighing down your credit score. Cell phone companies may require a steep deposit to open a cell phone account if your credit report makes it look like you have poor credit. Errors on a credit report can even lead to a lost job opportunity, since some employers run a credit check as part of a job application screening.
Errors That Can Bring Down Your Score
Check your credit report at least annually to make sure all the information being reported is accurate. Some errors to look for include:
If you’ve had credit problems in the past such as bankruptcy, foreclosure, or accounts in collections, make sure they’ve been removed if it’s been longer than 7 years or 10 years for Chapter 7 bankruptcy. Make sure there are not any items you don’t recognize because those could be a sign of identity theft.
Since the impact of credit report errors can be so high, you should dispute them with the credit bureau right away. Credit disputes can be filed by phone, online, or through the mail. Explain what you think is wrong and provide as much documentation as you can.
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