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Did your credit take a hit from credit-report errors? Fight back.

Most consumers expect to use credit for major purchases and needs. Common types of consumer credit include home mortgages, student loans, vehicle loans, home improvement loans, lines of credit and credit cards. People are careful to build good credit ratings through responsible financial behavior over time. So, when someone unexpectedly receives a suspicious rejection of a credit application, they should review their credit reports for accuracy.

The reason for the rejection could be that one or more of the three national credit reporting agencies (CRAs) – Equifax, TransUnion or Experian – released a credit report containing erroneous financial behavior attributed to the consumer. Errors in credit reports are far too common and can arise in a variety of circumstances, including:

  • Identity theft
  • Human mistake or computer glitch
  • Confusion with a relative or another person with the same or similar name, address or social security number
  • Reporting or “furnishing” merchants, other entities and creditors negligently sending to the CRAs incorrect information about the person’s financial activity
  • Mismerging one person’s report with another’s
  • And others

What harm can a credit-report error do?

This phenomenon is widespread and persistent. The Consumer Financial Protection Board (CFPB) reports receipts of more than a thousand complaints on average of “credit or consumer reporting” every day. This could include erroneous information from furnishers of information or trouble getting a CRA to correct an inaccurate data.

A mistake on a credit report can bring down the consumer’s credit score, making them look as if they have had a rocky credit history. Appearing to be a credit risk can be damaging in many ways. Of course, the person is likely to have credit applications turned down, which may prevent getting a mortgage or car loan.

But employers and landlords may also check credit reports and an error making the applicant look irresponsible could take them out of the running for a job hiring or an apartment lease. For government employees, poor credit scores can prevent approval for security clearances.

Consumers should self-monitor their credit-report data

Consumers can be proactive by regularly examining their credit reports with each of the three bureaus for accuracy. When a creditor or other third party pulls a report, it can negatively impact the consumer’s credit score. Consumers may periodically pull their own reports without negative impact at Annual Credit Report.com from all the bureaus for no cost.

The federal government officially authorizes this website, which has a wide range of information about consumer rights in credit reporting. This includes links to other informational sources, such as the Federal Trade Commission (FTC) and CFPB.

Self-monitoring is a good practice even if no evidence of problems has surfaced, but especially if the consumer suspects identity fraud. Or they may be in a dispute with a creditor and suspect it could have reported erroneous information.

Check for accuracy in your personal identifying information as well as in reported information like accounts, payment history, overdue payments, debt default, bankruptcy and more.

How can a consumer pursue correction of credit-report errors?

Anyone who discovers credit-report errors has the legal right to request correction through the CRAs as well as of the creditor that reported the erroneous information. The CFPB recommends doing so in writing and enclosing supporting documentation.

The CRA must investigate complaints that are not frivolous by contacting the reporter or furnisher of the erroneous information, such as a lender, credit card company or merchant. If the furnisher disagrees and stands by the information it sent to the CRA, the CRA still has to perform a good faith investigation and correct any errors, even though the furnisher tells it not to. Unfortunately, the CRAs often blindly parrot back what the furnisher says without performing any investigation.

If the CRA does not remove the erroneous information, the consumer may request that the CRA add information about the dispute to the credit report. The CRA would send the dispute information with the report itself to provide explanation to potential lenders, employers or landlords. The consumer may also file a lawsuit to force the CRA and furnisher to comply with the law and remove the erroneous information and seek compensation for any damages that ensue.

Legal representation

Unfortunately, getting a creditor or CRA to correct mistakes does not always go smoothly and consumers can experience frustrating disputes, all the while suffering from the fallout of it looking like they are poor credit risks through no fault of their own. This is where an experienced attorney can be of immense help.

A lawyer can advise about and take action on legal remedies like freezing credit, communicating and negotiating with creditors and CRAs about correcting errors, seeking recovery of financial losses from errors or failure to correct them, resolving problems from identity theft and potentially filing complaints or lawsuits.