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How to clean up your credit report

The Consumer Credit Checkup project provides advice for consumers about how to look for errors on their credit report and, if they find a mistake, how to correct it. (iStock)
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Prospective home buyers are advised to check their credit report for errors long before they apply for a home loan because mistakes can take time to correct.

That advice appears to be more important than ever this year. The Consumer Financial Protection Bureau (CFPB) said complaints about credit reports accounted for more than 50 percent of all consumers complaints to the agency in 2020. The top complaint was incorrect information on credit reports.

In response, Consumer Reports and other consumer advocacy organizations, including Americans for Financial Reform, Consumer Action, the National Association of Consumer Advocates, the National Consumer Law Center and USPIRG, have partnered to launch the Consumer Credit Checkup project. The project provides advice for consumers about how to look for errors on their credit report and, if they find a mistake, how to correct it.

Credit report errors can impact your credit score. A lower credit score can cause a denial of a mortgage or other financing. In addition, a low score or a negative item such as a bankruptcy can make it difficult to rent an apartment. Some employers also check credit reports before hiring someone.

Credit scores are supposed to be race-neutral. That’s impossible.

If you sign up for the Consumer Credit Checkup project, you’ll be required to complete a survey to report your experience with reviewing your credit report and correcting any errors. Consumer Reports will analyze the data from the surveys to hold the three credit reporting bureaus (Equifax, Experian and TransUnion) accountable for accuracy.

Among the most common errors on credit reports are loans and accounts that appear unpaid when they have been paid in full, loans listed more than once and debts reported as collections when they are not. Mistakes can also occur from wrong addresses, birth dates and Social Security numbers.

In 2020, some companies incorrectly reported deferrals of mortgages and student loans during the pandemic as late. The Cares Act requires companies to report deferred payments as current as long as the borrower was current before the deferral, according to Consumer Reports.

If you find an error on your credit report, Consumer Reports advises taking the following steps:

· Prepare dispute materials for each bureau: The three major credit bureaus don’t communicate with one another, so it’s smart to contact each one. Filing a dispute with each credit bureau, instead of the lender or bank, offers protections governing how quickly it must be handled. It also provides a legal pathway to sue the credit bureaus and creditors or collectors, if necessary.

· Gather evidence: If you are filing a dispute about debt that’s reported incorrectly, include account statements or payment records. Credit bureaus can dismiss claims without enough backup information as “frivolous.” Resubmitted claims can be denied if they are considered similar to previous ones.

· Create a paper trail: Write a letter explaining the problem. Avoid using standardized online forms provided by the credit bureaus, which might oversimplify your dispute by requiring you to choose among predetermined check boxes. Plus, by submitting your dispute online, you could unwittingly waive your right to sue as an individual or in a class action.

· Send all materials by certified mail: Keep copies for yourself. This makes it easier to confirm that the credit bureaus follow the lawful timelines. Credit bureaus have five days to get the disputed information to the financial institution or debt collector that supplied the information. If that company does not investigate and respond to the dispute in time, the credit bureaus are legally required to delete the information.

· If you lose your dispute, consider working with an experienced attorney: You can sue a credit bureau or financial institution over credit report errors. Find an attorney through the National Association of Consumer Advocates at consumeradvocates.org.

You can request a free annual credit report from each of the three credit reporting bureaus at www.annualcreditreport.com. Ideally, you can request one from a different credit reporting bureau every four months to review your reports.

In addition, the agencies are providing free weekly online reports until April 20, 2022. To sign up for the Credit Checkup project, click here.

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