Mistakes Plague Most Credit Reports

Have you checked your credit report recently?

Identity theft, mortgage fraud and credit-card fraud are all preventable with monitoring of your credit report. But these days, a mistake on your credit report can make it more expensive to borrow money.

Nearly three-quarters of all credit reports contain errors, according to a 2004 survey by the U.S. Public Interest Research Group. Those errors could include minor mistakes such as an old employer listed as a current employer, or major errors like an account listed with a high balance already paid off and closed.

Before applying for your next loan, make sure your lender is looking at the right information.

Credit information: You have a total of three credit reports, one from each of the three major credit-reporting companies -- Equifax, Experian and TransUnion. These credit reports are the basis for your credit score (also referred to as your FICO score). About a third of the score is based on payment history, another third on debt and the final third on the length of your credit history and the type of credit.

A lower credit score could mean paying a higher rate on your next loan or might disqualify you from borrowing altogether. Although you have to pay to find out your credit score (from $8 to $15, depending on the source), consumers are allowed one free copy of their credit report per year from each of the three reporting agencies.

Free reports: To order your free reports, check out www.annualcreditreport.com. Be aware, however, that not all sites advertising free credit reports will actually deliver. In fact, some will end up charging you money before you get access to your report, while others are designed to steal your personal information. Annualcreditreport.com was created by the three credit-reporting agencies and is the only Web site charged by the government with providing free credit reports.

To avoid the potential for online fraud altogether, order the reports from Annualcreditreport.com by phone (877-322-8228) or mail by printing out the request form and mailing it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

And since fraud can occur at any time of the year, consider spacing out your orders from the different credit companies at four-month intervals. While errors won't necessarily appear on all of your reports, checking one report every four months minimizes your risks that your credit is being trashed without your knowledge.

Fixing errors: Once you have your report in hand, check it closely for any mistakes. The report's format will vary among the companies, but, in general, the information falls under one of four categories: personal information, a summary of your different accounts, inquiries and negative items. While mistakes in your personal information can cause problems, the biggest hits to your credit score come from errors in the accounts summary and negative items.

If you find an error in one of your reports, consider ordering the other two reports as soon as possible. To fix a mistake, you'll need to contact the credit reporting company that listed the error. (If they all list the error, you'll need to contact each company.) The three credit-reporting companies have dedicated sections of their Web site for reporting mistakes and will address your concerns in 30 days. Instead of disputing the information online, consider submitting your dispute in writing to keep a paper trail. Send copies of your proof, not originals.

Evidence of fraud: If there is evidence of fraud on your reports -- accounts that you never opened or accounts with greater-than-expected balances -- contact the credit-reporting companies immediately to put a fraud alert on your report. Next, close the fraudulent accounts and file a complaint with the Federal Trade Commission using its online complaint form. Also consider filing a report with your local police department and make sure to keep a copy of the report for your records.

For more information on dealing with fraud and identity theft, check out the FTC's identity theft protection Web site here.

Peter McDougall is a freelance writer who lives in Freeport, Maine, with his wife and their dog.

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