Credit affects much of our daily lives — sometimes in ways we don’t expect. That’s why it’s so important to watch out for credit reporting errors. Here are five ways a mistake on your credit report can hurt you, and what you can do about it.
A Mistake on Your Credit Report Can …
1. Make It Difficult for You to Be Approved for New Credit
If there’s a mistake on one of your credit reports, that mistake could be dragging down your credit scores. And if that’s the case, you could encounter difficulty in getting approved for new credit.
Common credit report mistakes include incorrect personal information (such as your birthday or social security number, and even the spelling of your name), someone else’s information showing up on your report, duplicate accounts, and incorrect details on your accounts. If any of these mistakes are on one of your credit reports and the information is negative, your credit scores can suffer for it.
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2. Cause You to Be Charged Higher Interest Rates
Not only might you have trouble getting approved for credit if there are mistakes on your credit report, but credit you are approved for could come with a higher interest rate.
Interest rates are a lender’s way to mitigate risk. The more your credit profile shows that you might not repay your loan or line of credit, the higher the interest rate you’ll likely be charged. That’s why having good credit is about more than getting approved for loans — it also helps you get approved for better interest rates.
Higher interest rates mean higher lifetime costs of any debt you take on. Therefore, a mistake on one of your credit reports could end up costing you money.
3. Make It Hard to Get Insurance and More
Your credit profile doesn’t just impact your finances. Nowadays a variety of companies check your credit, from insurance companies and utility companies to landlords.
That means a mistake on your credit report could also make it difficult to get a new apartment, or your auto, renter, or homeowner insurance could cost more. For example, WalletHub did a study on the states where car insurance was most affected by credit scores. Alarmingly, they found that consumers who didn’t have a credit history pay “67% more for car insurance than people with excellent credit, on average.”
And it doesn’t end there…
4. Interfere With Your Employment Prospects
Did you know employers and potential employers have the right to view your credit reports as long as you give them permission to do so?
According to a survey done by CareerBuilder, 72 percent of companies surveyed said they perform background checks on new employees, with 29 percent of those including a credit check in their analysis. Although employers don’t typically see your credit score, they can see a limited version of your credit report. This is both to enable them to verify your identity and understand your financial health.
Errors on your credit report could paint a less-than-positive picture of you to potential employers.
5. Make You Look Responsible for Unauthorized Accounts
Finally, if someone else’s accounts erroneously show up on your credit report, then you could end up looking responsible for credit you never authorized. This can seriously hurt your credit scores if any of those accounts have late payments, end up in collections, or are otherwise managed poorly.
What’s more, seeing someone else’s accounts on your credit report could be a red flag for identity theft. There are times when a simple clerical error, such as an incorrect spelling in your name or a transposed social security number, could be the issue. However, it’s important to investigate the matter immediately to be absolutely sure that someone hasn’t used your personal information to take credit out in your name. If this happens to you, you can get help through the Federal Trade Commission’s IdentityTheft.gov.
What to Do If You Find a Mistake on Your Credit Report
Mistakes on your credit report can affect your life in numerous ways, and it’s important to dispute any errors you find immediately. Keep in mind, however, that there are three companies generating credit reports (Equifax, Experian, and TransUnion), and you’ll need to dispute the error with the credit reporting company showing it.
You can check all three of your credit reports for free once per year at AnnualCreditReport.com. Keep up a simple practice of reviewing your credit report regularly and disputing any mistakes you find so you can prevent costly credit report errors from interfering with your life.
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Ready to take control of your finances? Here are the facts about credit scores and credit reports you need to know.