How Credit Report Errors Can Affect Your Credit Rating

How Credit Report Errors Can Affect Your Credit Rating

Written by Caitlin Wood
Last Updated November 30, 2021

As you are probably aware, credit scores have a significant impact in your life. They can affect your eligibility to obtain a loan for a car, be approved for a rental or to purchase a new home. Unfortunately, all too many Americans have poor credit score ratings, and some of these ratings can be attributed to credit report errors. How exactly do these errors affect your credit score?

Charges Never Made

One of the major problems that could appear on your credit report is attribution of charges to you that you never actually made. As a result of these fraudulent charges, your credit score begins to sink lower and lower. Even though you never made the purchases, you are being held accountable for them. You should always check your monthly credit card bills to ensure that all of the purchases are legitimate. If you simply do not review the bills, then it is at least partially your fault if these charges make it to your report.

Not Noticing the Error

An error such as fraudulent charges is serious, but it might go unnoticed by you. As implied earlier, many people just pay their bills without paying attention to the source of the charges. A credit report is not something that is generally pulled on a regular basis, so a year could go by without your noticing the errors that have been made on it. This problem really opens the door to a lot of other issues. Since you are unable to constantly monitor your credit report, your scores can drop without your knowing about it.

Pulling Your Report

If you have been the victim of credit report errors in the past, then you likely are worried about the problem happening again. As a result, you wind up pulling your credit report on a fairly regular basis. However, engaging in this practice puts you at a risk as well. In some cases, your credit score will actually drop because of someone pulling the report. You want to protect yourself against problems happening again, but you simply cannot pull your report all of the time.

You Might Not Win

When you find that credit report errors have been made, you need to call up the agency. Paperwork will follow, and you will essentially be putting together a case against these errors. While you have a strong chance of being successful, especially if you can prove that the reporting happened in error, this is not always the case. Let’s say that you follow all of the appropriate procedures, but you still wind up losing anyway. Now you are stuck with these errors on your report and affecting your credit score.

Being Denied for Loans and Opportunities

The biggest problems that result from errors on your credit report are being denied loans, a place to live or even a home. All sorts of entities perform credit checks on you, and these include loan providers for houses and cars, banks, rental units, insurance companies, cell phone companies and sometimes even employers. If your credit score is poor, you might be denied for some or all of these opportunities.

Your credit rating is so important because you don’t want to miss out on excellent possibilities that await you. Therefore, you need to be sure to check your monthly statements and to pull your credit report when it is appropriate to do so.

For more information, check out this piece on correcting errors on credit reports.

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Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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