NEW YORK (MainStreet) — Disputing errors in a credit report is a necessity since your credit score is akin to serving as your financial fingerprint.

Catching errors early can be accomplished by reviewing your credit report once every four months, said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling in Washington, D.C. Consumers can review them for free from each of the credit bureaus. Despite the fact that consumers don’t have to pay to examine their score, 65% of respondents in the NFCC’s survey said they had not obtained a copy of their credit report in the past 12 months.

“Reviewing your credit report is a basic building block of financial success,” she said. “If consumers would routinely review their credit report they would be made aware of and able to address any inaccuracies or fraudulent activity, thus preventing an issue from turning into a full-blown financial headache.”

Knowing your credit score is the first step, but understanding what makes up your score is what really matters, said Jeff Golding, CEO of WilliamPaid, a Chicago-based company which allows people to build credit through paying their rent online for free.

“Without that knowledge you may find yourself swimming upstream,” he said. “If your credit score is low due to lack of credit, take advantage of programs that let you report your rent payments with companies like and others. Experian and Transunion are now including rent payments in their credit reports.”

If you are facing a money crunch, prioritize your bills and make sure you make timely payments for your apartment or house and auto loan.

“Payment history accounts for roughly 35% of your credit score, so being on time is crucial to maintaining or building a higher score,” Golding said. “Most creditors are willing to work with you, so before you decide not to pay someone, contact them first to attempt to come up with a payment plan that allows you to be successful in paying on time.”

Consumers should know their rights in disputing errors. The federal Fair Credit Reporting Act requires credit bureaus to provide a procedure for consumers to dispute inaccurate listings, said Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network, a debt relief provider. The easiest and most effective way to file an effective dispute letter is online by following the guidelines provided by each of the three credit reporting agencies on their websites.

Once you submit a complaint, it is then up to the creditor to investigate your complaint and report the results to the credit bureau within 30 days. If there was an error, the creditor must request corrections from all three credit bureaus. You can ask the creditor to send correction notices to anyone who received your report in the past six months.

If there is no response, the disputed information must be removed by the bureau. If the creditor does respond and does not change the item in dispute, the consumer can then add a 100-word statement, Gallegos said. This option does not change the score itself, but will give more detail to the lenders.

A recent FTC report on credit score errors found that four out of five consumers who filed disputes were able to correct and modify their credit reports with more than 10% who saw a positive change in their credit report after errors were corrected.

Adding statements to your credit report after you have disputed the lender’s decision can be a tricky move. A statement lets you tell your side of the story, but Gallegos recommends that working directly with the lender is the “absolute best way to resolve any dispute.”

In some cases adding a statement can be helpful. A credit report may show a status on a particular account as being late 60 days. If you dispute that, believing the status should be “never late,” the credit bureau then must contact the original creditor. If that creditor comes back to the bureau and does not agree to change the status, the consumer could add a statement.

“That statement would tell any prospective lenders down the line that you disagree with the status reported on the account and how the lender is reporting it,” he said.

Another good reason to add a statement is when there are out of the ordinary issues, especially those beyond your control which led to late payments, Gallegos said. A statement can explain that medical issues were the cause of late payments and now the issue has been resolved. Making a statement in this case is beneficial because it lets potential lenders know that it was a temporary situation and that you are back in control of your finances.

“This can be tricky as you also don’t want to provide data that indicates you are a bad credit risk,” he said. “Weigh your reasons carefully.”

If you have been trying to clear up an inaccuracy for awhile, making a statement could show that you are being proactive, Gallegos said. Remember that a statement will stay on your credit report for as long as you leave it there. Don’t forget that if you want it to be attached to all your credit reports, you must send it individually to each of the three credit reporting agencies.

If you are questioning whether making a statement will help you down the road, many experts say that doing nothing is best, because they can be interpreted in many ways, he said.

While disputing errors can be a lengthy and arduous process, the best thing is to manage your expectations. The majority of the time credit reports are automatically evaluated. It is not likely someone is sitting down and reading them, Gallegos said. “Even if someone does read a statement, it’s questionable as to how much impact it would have,” he said.

Depending on the lender and type of loan, a lender’s review will include the credit score as well as history. Lenders might read statements if it’s a borderline application and decide to review the loan request manually.

Lenders have been adhering more strictly to their underwriting policies lately, Gallegos said. The majority of lenders rely on automated credit scoring programs for these strict guidelines and those programs usually ignore statements. If you have been denied a loan and request that the lender reviews your situation and application again, then they will likely review the statement.

If you find yourself unsure of what to include in a statement, avoid anything that’s an “excuse” such as being out of town and refrain from sharing opinions such as a bad boss that caused you to lose your job.

This attitude only confirms that your payments were late and for poor reasons, he said.

-- Written by Ellen Chang for MainStreet