Warning: You May Have an Error in Your Credit Report
I’m the kind of person who’s very hands on with personal finance: I budget and track spending carefully on Mint, review credit card statements every month to avoid grey charges, and periodically monitor my credit score on various free apps. Since I graduated college, I thought I had been doing my due diligence and taking all necessary precautions to both save money and spot fraudulent transactions. However, little did I know that I was missing one crucial component: reviewing my official credit reports.
Wait, isn’t knowing your credit score good enough?
That’s what I foolishly thought. I also was under the impression that the information on credit monitoring apps was an accurate reflection of my official credit reports and that they could replace the need to request my credit reports directly from the three bureaus.
My credit report scare: what happened when I didn’t review official credit reports
Out of curiosity, I recently decided to download Credit Karma, another credit monitoring app. My heart skipped a beat when I was alerted about a “Derogatory Mark” in Equifax that could be affecting my credit score. I had never seen that in any other app before! I got even more anxious when I read that I apparently had a low balance in a collections account opened two years ago. Two years ago! I had never gotten any email, letter, or phone call about this. I promptly visited www.annualcreditreport.com and requested my free annual Experian, Equifax, and Transunion credit reports in order to further investigate. The collections account showed up in my credit reports from Experian and Equifax, but not from Transunion. I filed disputes with the two bureaus immediately.
Credit Report Errors are Common
Unfortunately, my experience is not an isolated case, as mistakes in credit reports are surprisingly common. In fact, a 2012 study by the Federal Trade Commision (FTC) found that 26% of consumers had a potential error in at least one of their credit reports. Moreover, identity theft and credit card fraud occur at an alarming rate. Last year, there were almost 1.3 million fraud reports filed in the U.S.
Despite the large number of errors and fraud cases, few Americans tend to review their credit reports on a regular basis. A 2014 study conducted by the National Foundation for Credit Counseling (NFCC) revealed that a majority (65%) of consumers had not reviewed their credit report in the past year. And within that group, 23% said they didn’t think reviewing their credit report was necessary because they already knew their credit score. Checking your credit reports annually gives you the opportunity to detect and dispute a potential error early on.
Chances are you may have a mistake in your credit report and not even know it! For more on credit report monitoring, stay tuned for our next blog post: 7 Tips for Monitoring your Credit Reports for Free.