Although credit report mistakes sometimes are trivial, erroneous information can lower your credit scores.


PHOENIX -- You can gaze into a mirror to see what you look like to friends, family members, co-workers and acquaintances.

But what image do you project to banks, credit-card companies, insurers and even prospective employers? Your reflection on the piece of glass won't tell.

To see how you appear to the financial industry, you should check your credit reports every now and then, looking for errors and omissions that can undermine your credit scores. It's also an opportunity to learn whether anyone has been opening accounts in your name and to find out whether anyone has been poking around in your files.

Checking your credit reports occasionally is among the easiest financial tips out there, and it needn't cost you a dime. Yet it's advice that's routinely ignored by most people.

Of the 200 million or so Americans with active credit files, only about one-fifth make the effort to obtain one or more of their reports in a given year. Cost isn't the issue, because you can check for free at But you do have to make an effort.

Failing to act can be hazardous, because credit reports routinely contain errors or incomplete data. In a recent Federal Trade Commission survey, one in four consumers spotted misinformation.

Although mistakes aren't always costly and sometimes are trivial, erroneous information can lower your credit scores -- the industry's quantitative grades of how risky you are as a borrower. Lower scores can make it harder or more expensive to get loans. Along with credit reports, they also can impair your ability to obtain an insurance policy or utility contract, rent an apartment and land a job.

Because the firms that compile credit scores don't reveal their precise methodology, it can be hard to figure out exactly which factors matter most.

For example, one point of scoring confusion involves "inquiries," which reflect the number of times you or others check your credit report. Multiple inquiries can be bad because that can signal you are applying for credit and might be preparing to add lots of debt -- possibly even heading for bankruptcy.

But each inquiry generally shaves your score by only a few points, and inquiries diminish in importance after 12 months or so, reports Also, if you cluster multiple inquiries within several days or a few weeks, scoring models typically count that as a single inquiry, under the assumption you are shopping for a low-interest rate. Inquiries made by credit-card companies and others to screen you for offers, made without your participation, won't hurt your scores.

As for credit scores, there isn't just one -- there are dozens. FICO, an industry leader in this category, has at least 49 varieties. There's also the Vantage scores compiled by the three main credit-reporting bureaus -- Equifax, Experian and TransUnion. Many banks and other lenders use more customized tools, and sometimes scores are tailored to a specific purpose such as auto loans or mortgages.

Impersonal nature

Credit scoring developed in part as a way to provide nearly instantaneous "yes" or "no" decisions for lending. If you drop into an auto showroom, for instance, the dealership can pull your credit score to give you a loan offer on the spot.

Scoring makes for quicker, more objective and more consistent decisions on applications, proponents say. Some of the many things not included in credit scores include a person's gender, marital status, ethnicity, national origin and religion. Other factors typically not included are age, area of residence, occupation and salary history, though some of that information does show up on credit reports.

Yet many readers responding to a question on's Facebook page voiced frustration about credit reports and scoring, including the impersonal nature of it.

"The credit-reporting system is way too powerful," wrote Jeri Foltz Gibson of Chandler. "I don't remember voting to give them that power. Who determined their power?"

Trischia Wadey of Pinal County indicated she and her husband are working to repair their credit but are finding it slow going. "It takes a whole lot more to fix your credit than it did to destroy it," she wrote. "I think it is ridiculous how much power your credit score has over too many aspects of your life."

Credit-scoring models change occasionally. For example, the Vantage scores were recently altered to make their numerical scale more similar to the FICO system and to boost their predictive power, especially for people with little or no recent credit history. In addition, scoring models occasionally are tweaked to reflect new borrower behavior.

"Over the last few years, we've seen some consumer responses that we never saw before," said Pete Radike, a director of product management at electronic-commerce firm Fiserv, speaking at a recent Consumers Bankers Association conference in Phoenix.

One twist that he and others cited has been the preference of many borrowers to stay current on their auto loans, even if it means falling behind on their mortgages. Another has been the willingness of underwater homeowners to walk away from their properties voluntarily, even when they could still afford to make payments and knowing that it would damage their credit scores -- from less than 100 to more than 150 points on the FICO scale, depending on circumstances.

"In the past, we focused on the ability (of borrowers) to pay," said Joanne Gaskin, a senior director at FICO and another speaker at the conference. The company has modified its models to better reflect willingness to pay, she said.

Similar behavior has been observed with credit cards. Recognizing that cards are critical to many routine activities, from paying bills to renting cars, some consumers focused on making payments on their credit cards even if it meant falling behind on housing obligations.

Young adults also are making things more challenging for the industry. Many of these people are showing surprising reluctance to take on lengthy obligations such as 30-year mortgages. "People under 30 will be more credit-averse and resistant to long-term loans," Radike said.

Conversely, Americans in general are taking out lengthier auto loans than was the case in prior decades. Vehicle loans stretching 60 months or more -- once rare -- have become fairly standard. The vast majority of auto-loan borrowers so far have been able to make their payments.

Dealing with problems

Inaccuracies and omissions can pop up for several reasons. Records from one person might get mixed up with someone else's account, details can be input incorrectly or they might not be included at all. Mistakes sometimes materialize when information providers sell or transfer accounts.

It can be challenging simply to keep basic identities straight. For example, the Consumer Financial Protection Bureau, citing Census Bureau information, says more than 2.3 million Americans have Smith as their last name, with 1.8 million Johnsons, 1 million Davises, 850,000 Garcias and 600,000 Lees.

Those are the unintentional errors. In addition to that, identity thieves can make a mess by opening accounts in someone else's name or taking over existing accounts by changing details such as the billing address. That's why it's so important to safeguard Social Security numbers, birth dates and other identifying information.

When fixes need to be made, it will take time and effort. Gerri Detweiler of says the first step is to get recent copies of reports from all three credit bureaus. This information might be different because the agencies don't share information.

The second step is to dispute the item with the credit bureau or the bank or other company that furnished it. If the information belongs to someone else or is generic, such as a name or address, it's best to go directly to the credit bureau, she wrote in a recent report. Otherwise, you probably want to start with the information provider. You also have a choice of logging your dispute in writing or online. If you favor the latter, be careful to read disclosures that might limit your rights.

After you have complained, it can take up to 30 days for the entity to provide an answer, according to Detweiler. If you still don't get a satisfactory response, you might need to escalate your complaint. This can include appealing to the Better Business Bureau, the state Attorney General's Office or the Consumer Financial Protection Bureau, and possibly even hiring an attorney.

Just don't confuse disputing an error with trying to get a legitimate item removed. Although you may add statements explaining problems, damaging information will stay in your files if it is accurate.

Records of late payments, delinquencies or collection items can remain in your files for up to seven years, according to the Consumer Financial Protection Bureau. Tax liens that were paid can stay for up to seven years. Bankruptcy filings still can be viewed for up to 10 years, although those featuring repayment plans remain for up to seven years, according to the bureau.

Like them or not, credit scores -- and the reports on which they're based -- are here to stay. If you don't want to pay more than necessary on loans or imperil your ability to land jobs and achieve other important financial tasks, it's important to monitor reports regularly and dispute inaccuracies when necessary.

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