Lenders review every mortgage applicant’s credit report to evaluate their ability to repay a loan and their overall creditworthiness. Your credit report — and credit score — can make the difference between a loan approval or denial and the interest you pay on your loan. If the errors on your credit report lower your credit score, you could end up paying a higher interest rate for the life of your loan.
Consumers are frequently reminded to check their free credit reports online to look for errors. A recent investigation by Consumer Reports found more than one-third of consumers found mistakes in their credit reports. While not every error can derail your loan application, a false negative item on your report could make it more difficult to qualify and delay your purchase process while you try to get the mistake fixed.
Consumer Report’s Credit Checkup project, which included nearly 6,000 consumer volunteers who checked their reports, not only found numerous mistakes. Many of the consumers also had difficulty getting their free credit reports online, and others said they were unfairly charged for services.
Normally, one credit report is available annually free of charge to consumers at www.annualcreditreport.com from each of the three credit reporting bureaus: Equifax, Experian and TransUnion. During the pandemic-induced economic crisis, the three credit bureaus announced they would provide a weekly free credit report to all Americans through that website. That program has been extended through April 2022.
Credit report errors
Complaints about credit report mistakes are among the most frequent types of complaints to the Consumer Financial Protection Bureau (CFPB) and have more than doubled since 2019, according to Consumer Reports. Errors range from incidents of identity theft to information from someone with a similar name or Social Security number getting mingled on your report. Your credit profile can also be damaged by misinformation such as accounts or loans that you have paid in full that appear unpaid, debts incorrectly reported as in collections or listed several times.
In Consumer Report’s investigation, 29 percent of consumers found incorrect personal information such as a wrong name or address. Eleven percent found account information errors, most often an account they didn’t recognize.
Under the Cares Act, accounts such as student loans and mortgages that were placed in forbearance are supposed to be reported as current. But 15 percent of consumers told Consumer Reports their accounts in forbearance were incorrectly reported as not current.
The most common errors related to accounts in the Consumer Reports study include unrecognized accounts, unrecognized debts reported to collections and payments wrongly reported as late or missing.
If you find an error on your credit report, you must file a dispute with the credit reporting bureaus. If the mistake is on your credit report from more than one bureau, you must dispute it with all three. But consumers often find corrections can be complicated and time-consuming. Nearly one-fourth (24 percent) of all closed complaints about credit reports to the CFPB in 2020 were related to a problem resolving a dispute on a credit report.
For the full credit score investigation by Consumer Reports, visit https://www.consumerreports.org/credit-scores-reports/consumers-found-errors-in-their-credit-reports-a6996937910.
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