Summit Financial Planning Tips: How to Understand and Identify the Most Common Credit Report Errors
When it comes to your financial health and current and future financial planning goals, your credit score and credit history can have a massive, wide-ranging impact. If you haven’t done so yet, we recommend you read both this previously published Summit blog (entitled “Financial Planning Tips: Credit Score Explained”) and this previously published Summit blog (entitled “Financial Planning Tips: The Importance of Having Good Credit”). Regardless of whether you are working with a financial advisor or not, one of the most important aspects of being responsible and proactive about your credit score and credit history is diligent self-advocacy.
It would be naïve to assume that all the information contained in your credit report is accurate. Errors are much more common than most people probably think. Just look at the results of this congressionally mandated Federal Trade Commission (FTC) study on the accuracy of the U.S. credit reporting industry, which found that:
- One in five consumers had an error on at least one of their three credit reports;
- One in four consumers identified errors on their credit reports that might affect their credit scores;
- One in five consumers had an error that was corrected by a credit reporting agency (CRA) after it was disputed, on at least one of their three credit reports;
- Four out of five consumers who filed disputes experienced some modification to their credit report;
- Slightly more than one in 10 consumers saw a change in their credit score after the CRAs modified errors on their credit report; and
- Approximately one in 20 consumers had a maximum score change of more than 25 points and only one in 250 consumers had a maximum score change of more than 100 points.
“These are eye-opening numbers for American consumers,” said Howard Shelanski, Director of the FTC’s Bureau of Economics. “The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don’t, they are potentially putting their pocketbooks at risk.”
Even if errors on your credit report are someone else’s fault, it is nevertheless your responsibility to get the errors fixed. A credit reporting agency has no responsibility to correct anything erroneous on your credit report unless you notify them of the error. Monitoring your credit reports is an important part of financial planning and being in control of your finances. The Fair Credit Reporting Act requires that each of the nation’s three major credit reporting bureaus (Equifax, Experian, and TransUnion) provide you with a free copy of your credit report, upon your request, once every 12 months. To order your yearly free copies of your credit reports, visit annualcreditreport.com.
Here are some of the most common credit report errors you should be on the lookout for when reviewing your own credit reports (just be sure to keep in mind that this is not an exhaustive list of all the potential errors that can arise on your credit report):
- Identity errors: Identity errors are errors made to your identity information such as a wrong name, phone number, Social Security number, address, or employers’ names. Sometimes identity errors occur when your account is mixed with an account belonging to another consumer with the same or similar name as yours. This erroneous mixing of different consumers’ information into a single file is called a mixed file error and people with common names or a name that includes a Junior or Senior suffix are most at risk for this error. Sometimes identity errors are merely the result of clerical errors whereas other times they are the result of identity theft.
- Account balance information: These errors may include accounts shown with an incorrect balance amount and/or an incorrect credit limit.
- Incorrect reporting of account status: These errors may include closed accounts reported as open or vice versa; accounts that list you as the owner of the account when you are actually just an authorized user on the account; accounts that are incorrectly reported as late or delinquent; and accounts that have an incorrect date of last payment, date opened, or date of first delinquency.
- Duplicate debt information: Sometimes the same account will appear multiple times on your credit report with different creditors listed. This error most commonly occurs with delinquent accounts or accounts in collection since delinquent or collection accounts are oftentimes sold over and over again to various debt buyers or collection agencies. In these cases, it is common to see the same debt reported more than once on the credit report when it should only have been reported one time on your credit report by the current legal holder of the debt.
Did you find any errors on your credit report? As discussed earlier in this blog, even if this error was not your fault, it is still your responsibility to dispute the error with the credit bureaus. To learn about the proper procedure for the dispute process, check out the soon-to-be-published Summit blog entitled “Financial Planning Tips: How to Dispute an Error on Your Credit Report.”
For more information on Summit Brokerage’s financial planning services and our independent financial advisors, visit www.joinsummit.com or contact us at (800) 354-5528.
About Summit Brokerage Services, Inc.
Summit Brokerage Services is part of Cetera Financial Group. Summit Brokerage provides a broad range of securities brokerage and investment services to primarily individual investors. Summit Brokerage also sells insurance products, predominantly fixed and variable annuities and life insurance through its subsidiary, SBS Insurance Agency of Florida. Summit Brokerage also provides asset management services through its investment advisor, Summit Financial Group, Inc.
About Cetera Financial Group
Cetera Financial Group® (“Cetera”) is a leading network of independent retail broker-dealers empowering the delivery of objective financial planning advice to individuals, families and company retirement plans across the country through trusted financial advisors and financial institutions. Cetera is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions.
Through its multiple distinct firms, Cetera offers independent and institutions-based advisors the benefits of a large, established broker-dealer and registered investment adviser, while serving advisors and institutions in a way that is customized to their needs and aspirations. Advisor support resources offered through Cetera include award-winning wealth management and financial planning and advisory platforms, comprehensive broker-dealer and registered investment adviser services, practice management support and innovative technology. For more information, visit www.ceterafinancialgroup.com.
*”Cetera Financial Group” refers to the network of retail independent broker-dealers encompassing, among others, Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities, Girard Securities, The Legend Group and Summit Brokerage Services.
 https://www.ftc.gov/news-events/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports (For the complete text of the FTC study, visit https://www.ftc.gov/sites/default/files/documents/reports/section-319-fair-and-accurate-credit-transactions-act-2003-fifth-interim-federal-trade-commission/130211factareport.pdf)