Good credit is extremely important in the world of loans. If you ever plan to apply for a mortgage, auto loan, personal loan, credit card, or even want to sign up for a cell phone plan, you’ll need good credit. With good credit, you’ll also be able to take advantage of much better interest rates and terms, making loans a lot more affordable. Without it, you’ll either be rejected or be stuck with super-high interest rates and inconvenient loan terms.
If you currently have poor credit, the best thing you can do is to start taking steps to improve it. There are numerous factors that can negatively affect your credit and while most are caused by irresponsible credit usage, others may be caused by errors on your credit report.
Can An Error On Your Credit Report Affect Your Credit Scores?
Credit scores may be negatively affected as a result of errors on credit reports. Many Canadians may be completely unaware that their scores are lower than they really should be, simply because of an error on their credit report.
This is why it’s so important to check your credit report every year and go through it carefully to make sure 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
With that being said, many consumers may not know what to look for when scanning their credit reports for errors. Here are the top 5 most common credit report errors.
1. Incorrect Personal Information
A lot of your personal information will be detailed on your credit report. You can expect to find the following pieces of personal information on your credit report:
- Full name
- Birthdate
- Phone number
- Home address
- Current and previous employer
- Social Insurance Number
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
One of the most important determinants of your credit scores is payment history. In fact, your payment history often had the biggest impact on your scores. 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 all the accounts you have in your name and whether there are any mistakes. For instance, it’s possible that you may have closed an account and ensured it 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 in fact yours, that doesn’t mean the information associated with them are always correct. It’s possible for accounts to 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 doesn’t do much good for a person’s credit, so if you’ve discovered that an account has been duplicated on your credit report, it may be negatively impacting your credit. 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 is a big deal these days. Hackers are becoming more and more 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 scores.
While there are a few ways you can go about protecting 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 there are any discrepancies in there that 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, such as your Social Insurance Number, name, address, or employer
Your credit report can be a great tool to use 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 is in fact not yours. 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.
Find out how long other information typically stays on your credit report?
Why Should You Check Your Report For Errors
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.
Credit Report Error FAQs
What is a hard inquiry?
How do I know if I’ve been a victim of identity theft?
How do you dispute an error on your credit report?
Final Thoughts
Your credit scores and credit report are pertinent to your financial standing and impact the types of loan products you’re eligible for, both now and in the future. That’s why it’s important for you to pull your report every year in order to make sure everything is as it should be. If you find any mistakes, you could be unfairly given a lower credit score than you rightfully deserve. Make sure you take the time to request and review your credit report, then report any errors you catch.
