Credit Management

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.

What can you do to prevent these kind of errors and get the credit you deserve when applying for new credit?

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 Insurance 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.