Have you looked at your credit reports lately? If you haven’t, you might be in for a surprise.
Credit reports are notoriously prone to errors, but in the past few years the errors seem to be more ubiquitous and harder to fix. According to records from the Federal Trade Commission, the total number of consumer complaints regarding credit- report issues jumped more than fourfold between 2019 and 2023, from 165,000 to 711,802.
Yet that figure represents just a fraction of the problems people had with their credit reports. Research from the Consumer Financial Protection Bureau indicates that the nationwide consumer credit-reporting companies — Equifax, Experian and TransUnion — receive millions of disputes annually regarding the completeness or accuracy of information on credit reports.
Why have credit report complaints skyrocketed?
One reason is that there was a major uptick in identity theft from 2020 to 2022. This crime, which can leave a victim’s credit in shambles, is responsible for the majority of credit-report complaints that consumers file.
At the same time, the public gained substantially greater access to free credit reports. Until 2020, the three credit-reporting companies granted consumers only one free report per year, as they are required to do by law. But in response to the COVID-19 pandemic, the companies began providing free access once a week. The change has given consumers a chance to see and report credit damage much closer to real time.
Why is it so difficult to fix your credit reports?
According to the Fair Credit Reporting Act, credit-reporting companies must assure “maximum possible accuracy” in your reports. But if you ask the companies to fix an error, they might tell you to take up the issue with the furnisher — that is, the credit card company, lender or debt collector that provided the information in question.
That often makes sense, because furnishers are the ones responsible for providing information regarding credit card balances, monthly payments and other details about your debt. However, many times consumers report that a furnisher will simply refer them back to the credit-reporting company.
On top of that, credit-repair companies have muddied the waters for everyone. If you’re on TikTok, you may have seen influencers promoting these businesses; there are more than 40,000 in the U.S. Many credit-repair companies are one-person operations, and they’re operating in an industry filled with scammers. According to these companies, their main job is to help customers by disputing negative information on credit reports. However, their services are superfluous because you can dispute incorrect information yourself. In fact, most people can file a dispute in just a matter of minutes — for free.
Nonetheless, the growing credit-repair industry rakes in billions of dollars in annual revenue by promising to get accurate, negative information (say, a collection account for a debt the consumer truly owes) removed from credit reports and then inundating the credit-reporting companies with disputes and hoping something will stick.
How do credit-reporting companies respond?
In short, they don’t. The companies are not required to investigate “frivolous or irrelevant” disputes, and they generally ignore claims submitted by third parties. Unfortunately, anyone who uses a template to write their dispute letter or whose claim resembles a third-party submission in some other way could easily have their claim dismissed. In just one month in 2020, the Consumer Financial Protection Bureau found that about half of all legitimate disputes were dismissed for this reason.
On top of that, your options for recourse have become weaker. Despite giving consumers more free credit report access in 2020, Experian, Equifax and Trans-Union adopted new policies the same year that made it easier to dismiss disputes as third- party submissions. In cases in which the CFPB intervened, consumers got relief in less than 2% of complaints in 2021, compared with 25% in 2019.
What should you do about credit report errors?
You might be tempted to give up before you even look at your credit reports, but there are more reasons than ever to keep a watchful eye on them. If you’re not monitoring your reports, you might not discover damaging errors or identity theft until you have a mortgage application declined, you’re turned down for rental housing or you fail a background check for a new job.
Instead of waiting for a credit report error to interrupt your plans, try reviewing your reports on a regular basis — and far in advance of applying for a new apartment or credit, so you have extra time to clean up any mess you may find.
For free weekly copies of all three of your credit reports, visit the federally authorized website www.annualcreditreport.com. While other free services, such as Credit Karma and Credit-Wise, can be useful for accessing your credit scores, AnnualCreditReport.com is the only place where you’re guaranteed by law to see full copies of your reports from all three credit-reporting companies.
When you read your credit reports, look carefully for details that don’t belong. If you’ve experienced identity theft, you might find accounts that aren’t yours or “hard inquiries” for new accounts you didn’t apply for. Other material errors to note include an incorrect Social Security number, a wrong date of birth, someone else’s name appearing on your reports, or payments incorrectly reported as late.
You should include all of those errors on a list of items to dispute. You might find other, legitimate negative records you would like removed from your credit reports, such as paid-off collection debt or a recent bankruptcy, but the dispute process is meant to rectify only inaccurate or incomplete information.
Tips for a successful credit report dispute
For each error in your credit reports, try to determine whether the credit-reporting company or the furnisher is the source of the problem. If, for example, the error pertains to a credit card account that rightfully belongs to you, the furnisher (in this case, the credit card company) is likely responsible and might resolve the issue if you reach out to it directly. If the furnisher refuses to correct the error, follow up by disputing it with the credit-reporting company.
However, if the error pertains to your identity, or an account that doesn’t belong to you appears on your report, start with the credit-reporting company instead. You should initiate a dispute with each credit-reporting company that shows the incorrect information.
Before you reach out to any party, though, gather any documents that support your claim. Useful documentation might include a copy of a bank statement showing your on-time payment; an identity theft report outlining how you were affected by a crime (go to IdentityTheft.gov to create the report); or an e-mail from a debt collector confirming a payment arrangement.
To find out where to file your dispute, take a look at the dispute disclaimer near the end of the credit report. You’ll see that you have the option to contact the credit-reporting company online, by mail or by phone. The fastest way to file is online, but this option can limit your ability to provide details and makes it difficult to prove that you even filed. For those reasons, the safest option is to submit your dispute by certified mail, with a return receipt requested.
When you write out the details of your dispute, make sure to include the consumer identification or report number on the credit report, details that identify each account in question, and a clear statement of what needs to be fixed. While referring to a template letter for disputes can give you an idea of how to format your letter, it’s best to use your own words because boilerplate language might get your dispute flagged as a third-party submission. To increase the chances that your dispute will be successful, send copies of your dispute documents directly to the furnisher via certified mail as well.
Once you file a dispute, the credit-reporting company has up to 45 days to contact the furnisher and investigate your claim. During that time, the credit-reporting company might request more information from you. Once the investigation ends, the company has four business days to block items on your reports that resulted from identity theft, as long as you submit proof of your identity, a copy of an identity theft report and a statement clarifying which info does not belong on your reports. In total, a credit-reporting company has five days to inform you of its decision. If a furnisher fixes an error as a result of your dispute, that furnisher has to provide each of the credit-reporting companies with updated information.
What comes after a credit report dispute?
Even if you take all the right steps when you file a legitimate dispute, it could be dismissed. Plenty of valid disputes appear to be ignored by the credit-reporting companies, and un-fortunately, there isn’t a big fix on the horizon. However, if you disagree with the decision, there are additional actions you can take.
Although filing a complaint with the CFPB appears to have become less effective in providing relief, it may still be worth a try. The CFPB shares complaints with the corresponding credit-reporting company or furnisher, and that party must respond within 60 days. You can submit complaints about credit-reporting issues at ConsumerFinance.gov or by calling 855-411-2372.
You can also add a written statement to your credit report to explain the error (you submit your statement directly to the reporting company). Adding a statement won’t fix the error or improve your credit scores, but creditors may see it when they review your reports in the future. Just be sure to note when the negative item is due for removal from your report, because you’ll need to delete your statement after that date. If you don’t, you could end up unnecessarily alerting future creditors to a past credit problem.
For unresolved errors that significantly damage your credit scores or make it difficult to qualify for new credit, further action may be warranted. If the credit-reporting company or the furnisher has failed to fix outdated, incorrect or unverifiable information in your reports, you may be able to file a lawsuit against them.
In 2020, Lisa Hill-Green did just that. After Experian dismissed two of her legitimate disputes, Hill-Green brought a class- action lawsuit against the company on behalf of herself and some 10 million other consumers who’d been affected. In 2023, Experian settled the suit for a reported $22.45 million.
To find out whether you have a legal case against a credit-reporting company, consult an attorney. Contact the American Bar Association (www.americanbar.org or 800-285-2221) or visit ConsumerAdvocates.org to find an attorney who has experience handling credit-reporting cases.
Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
