How to quickly and easily resolve mistakes in your credit report

A low credit score may actually be the result of inaccuracies in how your credit reports are collected and maintained.

Kevin Lamarque/Reuters/File
A credit card user displays her cards in Washington in this February 22, 2010, file photo. Some credit cards offer perks like points or cash in exchange for frequent purchases.

Does your credit score seem too low? Mistakes on your three credit reports might be to blame.

TransUnion, Experian, and Equifax each maintain a credit report listing your open credit accounts, your payment history, and any negative judgments, such as a recent bankruptcy or foreclosure. Unfortunately, these reports aren't always perfect. They might contain mistakes that could cause your credit score to plummet by 100 points or more. Yes, disputing a mistake on your credit report will take time on your part. But financial experts say that this time is well spent. (See also: 13 Things You Don't Know About Your Credit Report — But Should)

"The question I would ask is, 'Why wouldn't you dispute a claim that was inaccurate?'" said Dr. Billie Blair, president and chief executive officer of management consulting firm Change Strategists, Inc. "About once a month on our business credit card account there's an inaccuracy. We always call the credit company — they put it in dispute and resolve the issue."

Correct Mistakes With the Bureau and the Creditor

Jared Blank, chief marketing officer of deal site DealNews, agrees. He recommends that consumers correct the information in their credit reports in two ways.

First, they should file disputes online with each credit bureau that lists incorrect information. Experian, Equifax, and TransUnion now offer consumers the chance to fix errors through links on their websites. Once consumers contact the bureaus, they will then contact the financial institution — usually a credit card company, auto lender, bank or mortgage lender — that initially provided them with the incorrect information.

Blank also recommends that consumers directly contact the financial institutions that provided Experian, Equifax, or TransUnion with the incorrect information. This takes a bit more work: You'll usually have to provide a written letter outlining the mistake. For instance, if your credit card provider mistakenly told Equifax that you paid your bill late twice last year, you can write to the provider to explain that you've never made a single late payment.

"This will cut out the back-and-forth between the credit bureau and the company that provided the wrong information," Blank said. "If it was me, I would contact both the credit bureau and the company providing the misinformation."

Dispute It in Writing

Howard Dvorkin, the author of financial books Credit Hell: How to Dig Out of Debt and Power Up: Taking Charge of Your Financial Destiny, says that consumers should order annual copies of each of their credit reports from AnnualCreditReport.com. You are entitled to one free copy of each your three credit reports per year, so take advantage of this.

Once you have your report, study it carefully for errors. Mistakes aren't as rare as you might think. A study by the Federal Trade Commission in 2013 found that one in five consumers have errors on their credit reports.

Dvorkin recommends that consumers always correct their mistakes with written letters that they send to both the credit bureaus listing the errors, and to the financial institutions that have provided the mistaken information.

"Write a good old-fashioned letter detailing your dispute," he said. "Don't use the credit bureaus' online dispute form, because you simply can't possibly fit all the necessary details in the space they give you. Using those forms simply puts you at a disadvantage from the start."

You'll need to send separate letters for each mistake that you are disputing. If you find the same mistake on more than one of your credit reports, you'll need to send separate letters detailing the mistake to each bureau listing it. You should then send letters to the bank, mortgage lender, auto lender, or other financial institution that provided the incorrect information.

Dvorkin recommends that you send these letters by certified mail, and that you check "return receipt requested" so that you'll have proof that someone received your letters. You should also include copies of any documents that support your dispute, such as copies of checks that you mailed to your credit card provider or mortgage lender showing that you did, indeed, make a payment on time.

The Process Is Surprisingly Fast

Rod Griffin, director of public information for Experian, said that federal law gives the credit bureaus 30 days to resolve a dispute. That requirement, though, is a holdover from the days when the majority of dispute communication took place through snail mail. Today, it generally takes Experian 10 to 14 business days to resolve disputes, Griffin said. Often, it will take as few as two to three days.

Once a dispute is resolved, the financial institution that provided Experian with the information in question will contact the credit bureau. Griffin said that the institution will either tell Experian to remove the information from the consumer's credit report, update it with new details or, if the lender or bank disagrees with the dispute, to leave the information untouched.

Consumers who are not satisfied with these initial results will then have to contact the lender or bank directly to continue the dispute, Griffin said.

"Any time you see a mistake or find information that shouldn't be there, you should dispute it," Griffin said. "The goal is to have the report be 100% accurate. That's what really benefits consumers and businesses. Our objective is to have information that is accurate."

This article first appeared on Wise Bread.

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