5 Credit-Report Errors That Trip You Up


BOSTON (TheStreet) — At a time when banks are pickier than ever about issuing loans, Americans seem to be more obsessed than ever about their credit scores.

Unfortunately, they don't always pay attention to the information that determines the credit score — namely, the credit report. That's too bad because credit reports sometimes contain errors that hurt your credit score.

According to a 2004 report by U.S. PIRG, "Mistakes Do Happen," a quarter of the credit reports surveyed by the group contained serious errors, such as inaccurate delinquencies or accounts that didn't belong to the consumer. Quizzle.com, a money-management site with more than half a million subscribers, helps consumers process between 2,000 and 5,000 credit report disputes a month, according to Quizzle officials in Livonia, Mich.

"I always tell people that there's a difference between getting your credit report and understanding your credit report," says Gail Cunningham, a spokesperson for the National Foundation for Credit Counseling in Silver Spring, Md. "You've got to make sure that it is reported correctly."

The three major credit-reporting bureaus — TransUnion, Experian and Equifax (Stock Quote: EFX) are each required, by law, to provide consumers with one free credit report a year. And all three firms provide online forms and customer-service representatives to help consumers dispute errors in those reports. The mistakes include:

1. Inaccurate delinquencies

It's worthwhile to comb through the report for discrepancies regarding late payments, as 35% of a credit score calculation is based on whether you pay your bills on time. More importantly, look for references to debt you never accrued in the first place, especially medical debt.

"One of the highest-growing crimes is identity theft, and within identity theft, one of the biggest crimes is medical identity theft," says Todd Albery, chief executive officer of Quizzle. About 1.5 million Americans with a credit history have been victimized by this crime, in which someone steals the identity of the victim in order to afford medical care, according to a recent report by The Ponemon Institute, and more than half of them didn't know they were victims until more than a year after the crime occurred.

Keep in mind that delinquencies stay on your report for seven years, so the fact that you settled a debt last year doesn't mean that it should be removed from your report.

2. Inaccurate credit-limit information

Credit reports contain information about the spending limit on each of your credit cards. While these aren't the easiest errors to spot, they can be the most deleterious to your credit score. Generally, 30% of your score is based on the ratio of your debt to your spending limit. A high credit-utilization ratio, meaning you're close to maxing out your card, can drive down your credit score and a low ratio can bring it back up. That's why you want to make sure that the $8,000 spending limit on your Citibank (Stock Quote: C) card isn't mistakenly listed as $800 on your report.

3. Wrong name

Most of the information on a credit report comes directly from lenders, including your moniker. Typos happen, and if you're listed as both "Jeff Johnson" and "Jerf Jhonson" on a report, that's probably not a big reason for concern. But if your name is Jeff Johnson and you see the name "Shecky Green" on your report, there's a chance that the report mistakenly contains Mr. Green's financial records, too.

"We've seen with some people that other people's information gets pulled onto the credit report," says Todd Albery, CEO of Quizzle.

4. Right name, wrong person

Suffice it to say that the John Smiths of the world should scan reports carefully because they are more susceptible to identity mix-ups than the Engelbert Humperdincks. Furthermore, the chance of mistaken identity on a credit report increases when two family members share the same name, but neglect to note the identifying suffix — i.e., "Senior," "Junior" or "III" — on a credit application.

"I love George Foreman, but from a credit-reporting standpoint it's a nightmare," says Rod Griffin, director of public education for Experian. "He named all of his sons 'George Foreman.' You have many George Foremans with the same address, the sons being born within the same couple of years -- that causes some challenges for us."

5. Wrong employer or address

A credit report generally contains employment information that is only current to the date of the last major loan application — the car or the mortgage — so there's no cause for immediate worry if your credit report doesn't list your present employer. But it's a good idea to scan the report for places you've never worked or lived, keeping the aforementioned typo issue in mind.

"If we get an address that says 123 Oak Street and 132 Oak Street, we'll show both the variations," says Griffin. "But if you see 123 Elm Street, it could be an indication of fraud."

And while your address and your employer have no bearing on your credit score, it's still a good idea to keep the credit-reporting bureaus apprised of any changes, as potential lenders may be interested in your whereabouts. "It can matter," says Steven Katz, a spokesperson for TransUnion in Chicago. "It's best to review the report frequently and make sure it accurately reflects your current situation."

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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