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An Accurate Credit Report Saves More Than Money

Errors Can Affect Interest Rates, Insurance Premiums, and Business Opportunities


Even for the well-heeled, an inaccurate credit report can translate to lost opportunities or overly expensive ones. You may think you have good cash flow, your investments perform nicely, and you can get all the credit you want, so why waste time thinking about your credit report? The answer is because your credit report is probably flawed, and that costs you money. And as you’ll see, even if you have a good credit file, a flawed credit report can really set you back.

Why Your Credit Report Is Probably Wrong

According to a recent government study, 20 percent of all credit reports have material errors. Now, it’s true that if you have an excellent score the odds of having a major mistake on your credit report decline. In fact, the highest scoring people have the fewest errors — but they still have enough flaws on their credit report to worry about it.

What kinds of errors are we talking about? Accounts might be listed on your report that don’t belong to you. Late payments could appear that aren’t really yours. And charge-offs might also falsely appear.

If you accumulate enough of these false negative items, your score might drop without you even being aware of it. The result could be you’ll pay higher interest rates, greater life insurance premiums, or miss promising business opportunities. Of course, the shame of it is that these mistakes can easily be fixed.

The Problem with Having a Slightly Lower Credit Score

You might have a “good score” (between 720 – 780) when you deserve a great score (780-plus). Keep in mind that creditors and lenders evaluate how much credit they are willing to extend, and at what rate, based on which tranche you fall into. Let’s assume your real score is 780 but because of a very old error that shows up on your report by mistake, your score is 770. That’s still a good number but as a result of being in the second-best range, you will be given less attractive offers than you otherwise would.

And as I said above, your credit score is used for a variety of purposes — not just by credit card companies and lenders. Potential employers and business partners also give your credit report the once over before deciding on making an offer to you. Life insurance companies do the same. That means even a minor error could knock you out of the race if it mistakenly drops you to a lower credit range.

So if you think about it, you’ll understand that the more irons you have in the fire, the higher the stakes — and the more important every little credit point becomes.

How to Make Sure This Doesn’t Happen to You

With so much on the line, it only makes sense to review your credit report annually and dispute any and all errors you find.

Keep in mind that there may be more errors on your report than you think at first. After all, the law defines a credit report mistake as anything that isn’t accurate, verifiable, or complete. Blatant mistakes must be wiped off your report of course. But this also means that if the creditor can’t provide proof that a negative report is accurate, it also must come off. That happens all the time because companies are often unable or unwilling to produce evidence.

Finally, negative items must be complete, and if they aren’t, they have to come off your credit report. The best way to explain “complete” is by way of example.

Let’ say several years ago, you never received a bill so you obviously didn’t pay it. But even though you never got the bill, it could easily show up on your credit report and ding you. That’s neither right nor legal. As a result, it has to be expunged. This is just one of many examples of an extenuating circumstance making negative information on your credit report unfair and incomplete.

Please keep in mind that the only way you’ll get these and other errors off of your credit report is by identifying them and then disputing them. If you don’t, they will remain an unnecessary burden to you for seven to 10 years.

If you are financially responsible, you should have the highest credit rating possible and enjoy the benefits because you earned it. But because this industry is fraught with errors and mistakes, there is a good chance that you are being unjustly penalized for someone else’s clerical errors.

Review your credit report, and demand that the credit bureaus and creditors repair mistakes they made that are hurting you.

Neal Frankle is a Certified Financial Planner (CFP®) in Los Angeles. He is also the chief editor of WealthPilgrim.com, MCMHA.org, and CreditPilgrim.com.



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