Keeping tabs on your credit report is the only way you can be sure that there aren't any mistakes or omissions that could be hurting your credit score. Below you'll find the top 5 most common mistakes found on a credit report. These are the mistakes you should be looking for every time you get your credit report.
1. Reporting Balance
One of the most common mistakes found on any credit report is an error in the reported balance on an account. Maybe you've already closed an account or paid it off completely yet your credit report is still showing a balance on that account. This is typically an error on the part of the lender which has failed to report an updated balance.
This impact on an incorrect balance can be huge. Up to 30% of your credit score is determined by how much debt you have compared to how much credit you have available. Even one payment that wasn't reported can shift this percentage giving you a much lower credit score.
2. False Collections Activity
Sometimes a lender may report to your credit that collections have taken place when they haven't. They may also report collections by mistake when your collections have been paid off completely. This mistake is typically caused by lenders that buy and sell charged-off debt. Companies buy old collection accounts and then find out who currently has the best credit to shake them down for repayment. People with good credit are singled out as they are more likely to pay down the debt to keep their record clean.
3. Negative Entries Older than 7 Years
Most negative entries are removed from your credit report within 7 years according to the Fair Credit Reporting Act. Unpaid judgments can stay on your credit report for up to 7 years or whenever the statute of limitations expires, whichever is longer. For example, in Ohio the statute of limitations is 15 years. If you are sued in Ohio and fail to pay the judgment it can remain on your credit history for 15 years.
4. Negative Activity You Aren't Responsible For
In the event of identity theft you may end up with accounts reporting to the credit bureaus which you aren't responsible for creating. Unfortunately, this isn't just caused by identity theft. People living in the same area who have the same or similar names may also have their credit report information jumbled from time to time. The data reported to the bureaus by lenders isn't always verified with information like social security numbers. This makes it especially important to check your credit report regularly if you have a very common name.
5. Unreported Information
Most lenders are great at reporting any late payments or other problems you may have paying back your loan. On the other hand, they aren't always great at giving you credit for things you have paid for regularly. Not having good information in your credit report is about the same as having bad information. If your risk can't be assessed based on information in your credit report most lenders automatically consider you to be a high risk and will give you high interest rates or turn you down completely. Normally you can contact your lender to help correct this type of mistake. Certain payments like your cell phone contract or power bill won't be on your credit report unless you fail to pay them.
