Audits and surveys from the past 10 years show that 70 to 80 percent of Americans have at least one error on their credit reports. Technology hasn't helped the situation: as we transition more of our financial lives to electronic records, there are as many opportunities to make mistakes as systems to clean them up. Correcting errors on your credit report takes dedication to a routine and an eye for detail.
In the United States, three large organizations (Equifax, Experian and TransUnion) convert financial data and public records into your credit reports. Another agency, FICO, makes a popular set of mathematical tools that turn your reports into a numeric credit score. And a handful of other companies, often called the "shadow" credit bureaus, track other kinds of information about your credit history and other details of your life. Fortunately, if you can help the "big three" keep their databases accurate, other systems usually fall in line.
Check your credit report every few months. I learned a great trick from radio host Clark Howard. By law, you get a free copy of your credit report every year from each of the three credit bureaus. Instead of requesting all three at once, just grab one at a time, and space your requests out every four months. If you worry about identity theft, many of the best credit cards include free or discounted credit report monitoring as a value-added service to cardholders.
Use online dispute resolution forms. All three agencies have converted to web-based systems that let you request investigations into credit report errors. Your free credit report will contain a link to flag or correct any line item. Click that link, and the bureau will assign you a tracking number for each investigation, communicating with you via e-mail along the way.
Dispute inaccuracies with original creditors and collection agencies. Sometimes, a creditor may "affirm" a wrong item to the credit bureau. If that happens, send them a printed letter disputing the information and requesting that they remove it from your credit report. Send the letter via Priority Mail or Certified Mail with signature confirmation, in case you later need to prove receipt of the document. One more thing: don't sign the letter. Some disreputable collections agents have been known to cut and paste signatures into false contracts later used to affirm incorrect information. Instead, just print your name as listed with that creditor at the end of the letter.
Contrary to popular belief, nobody at the credit reporting agencies is out to get you. They simply collect the information sent to them from their client companies, who trade information about you in exchange for access to data about other consumers. If a dispute investigation doesn't go your way, you can request a "consumer statement" be added to any line item that states why you disagree with the information.