Home > Credit 101 > How Do Credit Report Errors Happen?

Comments 0 Comments

If you have seen wrong information on your credit report — and plenty of people have — you’ve probably wondered how it got there. After all, if the statements you get from your lenders are accurate, shouldn’t your credit reports be? Credit reporting agencies manage billions of pieces of information about our credit histories, though, and there are several ways mistakes can happen.

1. Consumer Errors

Although many of us apply for loans and credit cards online these days, there will still be times when you fill out an application by hand. If your handwriting is unclear, or if you make a mistake filling it out, that error will be entered into the creditor’s system and may make its way to a credit reporting agency as a result.

One thing you can do to help reduce these types of errors is to fill out credit applications accurately and carefully, and to use your best handwriting. Another suggestion: If you are a Jr. or Sr. or have a family member with a similar name, be consistent in using your full name.

2. Furnisher Errors

“Furnishers” refers to companies that supply information to credit reporting agencies, such as credit card companies, mortgage and auto lenders, collection agencies, and the companies that supply public record information such as bankruptcies, tax liens and repossessions.

“The furnishers are the banks, lenders and debt collectors that have subscriptions to the credit bureaus. It is not uncommon that they mis-enter information which they send to the credit bureaus, which results in errors,” says Robert F. Brennan, Los Angeles-area consumer credit protection attorney at SoCalCreditDamage.com.  “Also, an even greater problem arises when furnishers are tasked with correcting these problems, which sometimes are hard to detect or track down in a maze of electronic information,” he says.

And there is always the possibility that a dispute can hurt your credit. Refuse to pay that last cellphone or medical bill because you don’t think it is correct? Watch out — it could wind up on your credit report.

Some furnishers of information may just be sloppy or not have good records to back up the data their reporting. The Consumer Financial Protection Bureau recently took action against a Texas-based auto lender that allegedly provided wrong data to credit bureaus through “systemic inaccuracies,” ordering the firm to pay a $2.75 million fine.

Or look at the mortgage meltdown where numerous mistakes were made by banks and mortgage loan servicers. If those agencies don’t have the proper records required to foreclose, it’s hard to imagine that all the information they are reporting is correct.

3. Credit Reporting Agency Errors

“As sophisticated as the bureau’s databases are, they are still subject to computer errors, as with all automated systems,” Brennan warns. “Mis-reporting credit information or ‘mixing files’ continues to happen at the bureau level as well.”

It’s important to understand that information ends up on a credit report because it gets “matched” with other information about a consumer, and that process isn’t failsafe. Mismatching of consumer’s information can lead to mistakes on credit reports, sometimes serious ones.  “If a consumer has even a false address or a false middle initial in his or her credit report, over time this can result in his or her file getting mixed with someone else’s. This problem is even bigger if he or she happens to have a similar Social Security (number) to another consumer with a similar name,” Brennan says.

Credit reporting agencies rely on information from furnishers, and if the information they get is wrong the credit report will be wrong. As the saying goes, “garbage in, garbage out.”

“Mistakes by public record contractors: the bureaus contract out their collection of public records information (foreclosures, judgments, bankruptcies, etc.), and these independent contractors can often make mistakes in providing the information to the bureaus,” Brennan warns.  “As with the other furnishers, these contractors sometimes make mistakes in trying to correct their own mistakes.  This is another frequent source of credit report errors.”

4. ID Thieves

If an identity thief opens accounts in your name, the credit reporting agency probably won’t know there’s a problem and neither will the creditor involved until you report it. That’s one reason why identity theft can go undetected. Unless you are checking your credit or trying to get credit, you may not know something’s wrong. Credit report mistakes can be a sign of identity theft. If you check your credit reports (which you can do for free once a year) and see an account you don’t recognize, it’s important to dispute the account immediately.

It Adds Up

With all the possible ways mistakes can creep onto credit reports, you will want to check yours for accuracy. If you check your credit reports once a year through AnnualCreditReport.com (or stagger your requests so you are getting one report from each major agency every four months), you also want to make sure you have a system in place to monitor your credit throughout the year. You can get a free credit score plus an action plan for your credit updated monthly at Credit.com. If you do find mistakes on your credit reports here’s how to dispute them.

More on Credit Reports and Credit Scores:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team