Credit Basics
Credit Report
How accurate are credit reports?
Analysis has been done for years on
the exactness of credit reports without any hope of reaching a widely accepted error
rate. Consumer credit databases are usually accurate since they contain data compiled
from credit grantors' billing records and government records; however, errors can
appear in several ways.
Sometimes a credit reporting agency's internal operations
make mistakes. Human error can be at fault. A clerk might make an error or misread
a hand-written credit application. Sometimes a consumer's payment history is reported incorrectly and a payment is applied to the wrong account.
First, always use the same name on all your credit cards, loans, and lines of credit. For instance, Robert A. Consumer
should not use his middle initial in some accounts, and omit the initial for other
accounts or use his nickname, Bob, when applying for still other accounts. Doing
so can introduce inconsistencies and incompleteness in his report. It also can lessen
his chance of getting the credit he asks for. Omitting, adding, or changing your
name almost guarantees that credit grantors and credit bureaus will mix up your
credit accounts.
Always provide your Social Security Number when
applying for credit. This helps prevent your credit information from being mixed
up with other consumers with the same or similar name.
Always list your address and your previous addresses
for the past five years on your credit applications. This will help credit bureaus
link together pieces of your credit history -- even if you move across the country.
Tips to help you understand
what really is an error
When you are inspecting your credit
report, it is important to know what really is an error and what is not. Credit
bureaus and credit grantors sometimes have unfamiliar definitions for everyday words.
When you see those words used, you may think your credit report has an error when,
in fact, it does not.
For example, the term "current" means you are making,
or you have made, your payments on time. Even if you do not have a balance, or if
the account is closed, the account may still appear on your credit report as "current".
You probably would define "current" to mean "up to date" or "at the present time,"
the credit industry uses it to mean the opposite of "delinquent."
The term "paid" means a certain account is closed.
So even if you have paid off a credit card account, for example, it will not be
listed as "paid" unless it also is closed to new charges. You probably think a "paid"
account is one that is paid off, but it is not.
The term "late payments" refers to delinquency which
will stay on your credit report for seven years from the date the payment was due.
This is true even if you later pay your bill in full. Many reports provide columns
listing the number of times an
individual has been 30, 60 and 90+ days behind with
a payment. Zeros in these columns are ideal and any numerical entry indicates a
delinquency.
What matters most to you is how accurate your own
credit report is. We encourage consumers to review their credit reports on a regular
basis -- at least every one or two years -- or before purchasing a major item such
as a home or car.
If you find an error in your report, you should
confirm it with the source of the information (for example, a credit grantor) to
verify your dispute. Once the error is verified -- no more than 30 days later, the
credit bureau should remove the item from your report. This service is free of charge.
It is important to remember that no one benefits from an inaccurate credit report.
