How to fix mistakes in your credit report

By Marianne Curphey

You don't have any unpaid bills or large amounts of debt. So why were you rejected for that mobile phone contract, credit card or personal loan? Maybe your credit isn't as good as you thought it was -- or maybe there's a mistake in your report.

With multiple financial entities reporting your information to multiple credit rating agencies, mistakes can happen. Here's how to find them before potential lenders do.

The first line of defense
The best way to check whether all the information in your credit file is correct is to request copies of your reports regularly.

"It is important to everyone to know what is on their report and whether the details are correct," says Paul Crayston, spokesman for the credit counselling service National Debtline. "It only costs a couple of pounds to check." credit-report-mistakes

You can request your reports online from all three credit reporting agencies (Experian, CallCredit and Equifax) for £2 per report.

Your report holds information about your current and recent addresses, employment history, credit applications you've made, loans, credit cards and mortgages that you have, and whether you are in arrears or have defaulted on payments due. Simply looking at the information in your report can alert you to mistakes that look bad to lenders -- such as accounts you never opened, debts you already paid off (but that are still listed as unpaid) or incorrect personal information that doesn't match the information in your credit application.

Common credit report mistakes -- and what to do about them
Mistakes in your credit reports could be due to simple typos -- or something more sinister. Some possibilities include:

  • Identity theft: A thief who gets ahold of your personal information can make fraudulent applications for loans using your name or address. To potential lenders, it looks like all that debt is yours.

    Roughly 113,000 people a year report their identities have been stolen, says James Jones, head of consumer affairs at credit reference agency Experian.

    "A lot of people only found out when they are refused credit out of the blue," Jones says, "And it is a big enough issue now that credit agencies have specialist teams working on this to help people sort it out."

    Once you report fraudulent activity to the credit bureau, your work isn't done. You will need to report the crime to the police and then start the lengthy process of returning your credit to good standing. According to a guide from Equifax, that involves freezing your accounts with banks, creditors and utility companies -- and checking your credit report often for any new accounts opened in your name.
  • Financial links to other people: You may have separated from a spouse or partner and not have a financial relationship with that person anymore. But if, for example, you had a joint credit card you thought was closed (but actually wasn't), your ex's behavior may continue to affect your credit rating.

    If you and the person you shared credit with lived at the same address, that can often confuse things, as credit applied for at your address might accidentally be automatically assigned to you on your report.

    "Marriage is not a financial contract, but if you have applied for joint credit in the past -- unless you tell us about your change in circumstances -- your credit score could be affected by the other person's credit data," Jones says. "If anything [on your report] does not apply, then you should write to us to ask us to remove these links."

    Crayston recommends writing to the credit agency to "disassociate" yourself from your former partner.

    "You will need to fill in a form giving details about the people you want removed from your report," Crayston says. "You only need to contact one of the credit reference agencies, as they will share the disassociation with the other agencies."
  • Incorrect information: This category includes missed payments due to disputes with companies that claim you owe them money. Or perhaps you paid off a debt long ago, but the creditor is still reporting the debt as unpaid to the credit agencies.

    If the errors in your report fall under the latter category, they'll likely be simple to fix. In general, according to Equifax, you should be able to settle things with the creditor. Many have standardized procedures that let consumers dispute items on their accounts. Once the error is resolved, the correct information gets reported to the credit agency, and your report is clean.

    If, however, you're having a lengthy dispute with a creditor -- or if the mistake is taking a while to get resolved, you can also volunteer to add information to your credit files in what is called a notice of correction, Crayston says. That notice allows you to explain the circumstances behind the debt so that lenders will see it when a credit search is made.

    The three main credit reference agencies have agreed to standard statements that customers might choose to add to their notices of correction. A notice can be added or removed whenever you request it, and it will leave no permanent footprint.

No matter which errors your credit report has, they can cost you a loan, good credit card terms or even a job. So it's a good idea to make sure that all your information is accurate and up to date. Once you've reported an error, follow up in 30 days to see if it's been corrected.

"When you are applying for credit, you want to paint the best possible picture of your own financial circumstances," Jones says. "Credit details are updated on a monthly basis so some very recent changes may not show up immediately."

See related:  Credit counsellors share consumers' biggest credit mistakes, 5 tips for finding a financial adviser you can trust

Published: 5 June 2012