Your credit score is a key factor taken into account when a lender is reviewing a loan application. These scores are formulated by analyzing your past credit performance, but the information gathered and included on your credit report may not be accurate. Having inaccurate data on your report can lead to lower scores and less favorable loan terms.
The first step is to obtain a free copy of the credit reports from each of three primary credit reporting agencies: Equifax, Experian, and TransUnion. It is necessary to get all three reports because each of them are based on different databases and a mistake on one report may not be recorded on another. The lender is likely to look at all three scores; therefore, the savvy borrower should as well.
After receiving the free credit reports from the three agencies, a line item review is required. Look at every reported incident, especially those that negatively impact the rating. These obviously include reported defaults and late payments, but also look to make sure all outstanding loans and credit accounts are listed, that the available credit listed is correct and so on. All these factors play a role in the overall scoring.
The process of retrieving credit data and entering it into the agency’s database is prone to mistakes, especially on reports that are not monitored frequently or for people that have common names. In view of the enormous amount of data received and the massive task of sorting it and then entering it into the agency’s database, mistakes are virtually inevitable. This means it should come as no surprise to find at least some mistakes on a credit report.
Once mistakes are located, the next step is to appeal the entry on the credit report. All three of the primary credit reporting agencies have claims forms available on their websites. When filing a claim it is important to explain why the reported information is incorrect and to include any additional documentation that may be available to substantiate the claim. It is also worth noting that more recent items are less likely to be removed, than old items that have been included for a long time.
Once the claim is initiated, it usually takes 30 days for the agency to investigate the matter. Depending on the results of the investigation, the item may or may not be removed. It is not uncommon for lenders to fail to respond after a claim has been initiated. If this happens, the bureaus are required to remove the information from your credit file.