Good credit is pretty important in the world of loans. With good credit, you stand a better chance of getting approved. Plus, you’re more likely to snag a lower interest rate and better terms. On the other hand, bad credit can make it more difficult to secure a loan, and even if you do, you’ll pay higher interest.
Aside from poor money management, credit report errors can also cause your credit score to suffer. Several mistakes are possible, and if found, they should be fixed right away.
Key Points
- Many things can negatively affect your credit score, including mistakes on your credit report.
- Some of the more common credit report errors are mistakes with personal information, incorrect payment status, and inaccurate account statuses, among others.
- If you spot an error on your credit report, have it fixed by either the creditor or the credit bureau immediately.
Can An Error On Your Credit Report Affect Your Credit Scores?
Yes, credit scores may be negatively affected because of errors in credit reports. Many Canadians may be completely unaware that their scores are lower than they should be, simply because of these mistakes.
This is why it’s so important to check your credit report every year and go through it carefully to ensure it does not contain any errors or incorrect information. If it does, it’s imperative that you dispute them right away.
Common Credit Report Errors To Look Out For
It’s important to know what to look for when scanning your credit reports for errors. Here are the top five most common credit report errors:
1. Incorrect Personal Information
A lot of your personal information will be detailed on your credit report, such as the following
- Full name
- Birthdate
- Phone number
- Home address
- Current and previous employer
- Social Insurance Number (SIN)
While errors on your personal details may seem like no big deal, they have the ability to negatively affect your credit scores. This can also make you look like an unreliable borrower, which can sometimes mean the difference between getting approved for a loan or rejected.
As such, you’ll want to make sure to dispute any errors and ensure that this information is all up-to-date and accurate.
2. Incorrect Payment Statuses
The most important factor involved in the calculation of your credit scores is payment history. If you miss a few payments and are at least 60 days past due on them, this will generally negatively affect your credit scores.
So, if a lender or creditor mistakenly reports your payment as late or if the credit bureaus are not up-to-date on the latest information regarding your payment activity, it’s important to update that information.
3. Incorrect Account Statuses
Most of your financial accounts will show up on your credit report. This includes all accounts that are active or have been closed in the past, such as home loans, personal loans, auto loans, student loans, credit cards, and so forth. Checking the status of these accounts is important as well.
Account statuses can fall under any number of the following categories:
- Paid in full monthly as per the agreement.
- Paid and closed with no late payments recorded.
- Account paid in full for less than the initial balance, which means the account has been paid off but not in full. It was likely settled with the creditor and can have a negative impact on your credit scores.
Reviewing your accounts and seeing what their statuses are can help you keep tabs on them and identify mistakes. For instance, it’s possible that you may have closed an account that was paid in full with no late or missed payments, but the report may indicate otherwise.
Similarly, the report may even show accounts that do not belong to you at all, which could be pulling down your credit scores unfairly.
4. Duplicate Accounts
Even if the accounts listed on your credit report are yours, that doesn’t mean the information associated with them is always correct. Accounts can be reported more than once, which ends up making it look as if you have more active credit and higher debt than you really do.
A high debt load is not good for your credit. So, if you’ve discovered that an account has been duplicated on your credit report, your credit score may be negatively affected. In this case, the credit bureaus will need to wipe out the duplication, which will effectively reduce your debt load and potentially add a few more points back to your scores.
5. Identity Theft
Identity theft can have dire consequences and is becoming increasingly common. Hackers are sophisticated in how they steal people’s identities. Anything like this found on a credit report should be reported and cleared up immediately, as the repercussions can be severe, in addition to bringing down your credit score.
While there are a few ways you can protect yourself against identity theft, checking your credit report is a good place to start. By pulling your credit report, you can review it in great detail to see if any discrepancies would suggest that someone has been tampering with your identity.
When looking at your credit report, check for:
- Unfamiliar credit inquiries on your credit report
- Accounts you didn’t open
- Debts that you can’t explain
- Inaccurate or fraudulent information
Your credit report can be a great tool to catch identity theft. While you might not always be able to prevent identity theft, you can take a proactive stance and minimize the negative effect it may have on you.
6. Delinquent Accounts
It might sound impossible, but sometimes credit reports display information about accounts that do not belong to the person in question. It’s not uncommon to find other people’s credit information on another person’s credit report.
This typically happens when credit bureaus get confused by two different people sharing the same name. In this case, it’s possible for the account of one person to be included on the credit report of another person of the same name.
If that person’s account is riddled with negative payment history, it may negatively impact your credit scores. As such, make sure that the delinquent account does not belong to you. Even if the account is in good standing, it’s still important to get it off your credit report as soon as possible to prevent any issues in the future.
Recent Stats On Credit Report Errors In Canada
Credit report mistakes are not uncommon in Canada. Consider the following stats:
- Approximately 34% of Canadian consumers found at least one error in their credit report, as per a 2021 Consumer Reports investigation.
- Of these errors, 11% of them had to do with account information mistakes, with the most common type being accounts that are not recognized.
- The rate of identity thefts in Canada as of 2023 is 0.013%
Why Should You Check Your Report For Errors
Checking your report for errors is important for several reasons:
Prevent Financial Loss — Mistakes on your report can lower your credit score, which can make it more difficult to get loans or credit cards, or increase the interest rates you’re charged.
Detect Fraud Early — Reviewing your credit report on a regular basis can help you identify unauthorized activities or potential identity theft early. This will give you more time to take steps before more severe damage occurs.
Ensure Accurate Information — Errors like incorrect personal details or out-of-date account information can negatively affect your financial standing. Fixing these mistakes ensures your credit report accurately reflects your financial profile.
Improve Chances Of New Credit Account Approval — An accurate and positive credit report can boost your chances of getting approved for loans, mortgages, credit cards, or even getting a job or renting an apartment.
Stay Up-To-Date — Regular credit checks help you stay informed about your financial habits and can help you better manage your credit.
Final Thoughts
Your credit scores and reports play a key role in your financial standing and impact the types of loan products you’re eligible for, both now and in the future. That’s why you need to pull your report every year (or even more frequently) to ensure everything is as it should be. If you find any mistakes, your credit score could be unfairly impacted. Make sure you take the time to request and review your credit report, and report any errors you catch.
