An error or inaccuracy on your personal and/or business credit reports can drag your credit scores down. That’s the last thing you need if you’re planning to apply for business financing. A lower credit score could potentially result in a steeper rate when you borrow, or lead to being denied for credit altogether.
Fortunately, you don’t have to be stuck with credit score damage because of an error. Here’s how to identify and fix credit report mistakes.
What Counts as an Error?
Credit reporting errors are items that are mistakenly attributed to your credit file. These may include:
- A paid account that still shows a balance due
- Accounts that don’t belong to you
- Accounts with a positive payment history that are inaccurately reported as delinquent
Payment history makes up the largest share of your personal FICO credit score. A late payment reported in error may shave serious points off your score.
Business credit scores, such as the Dun & Bradstreet PAYDEX Score, also consider payment activity. If a vendor isn’t reporting a line of credit properly, that also could result in a lower business credit score.
It’s important to understand the difference between a credit reporting error and a derogatory mark. Derogatory marks include late or missed payments and collection accounts; as long as they’re factually correct, they can’t be disputed.
Reviewing your personal and business credit reports regularly — once per quarter, for example — can ensure that errors don’t go unnoticed.
How to Dispute a Credit Reporting Error
The Fair Credit Reporting Act outlines a specific process for disputing credit report errors on personal reports. The first step is identifying which credit reporting bureau (Equifax, Experian or TransUnion) is reporting the error. The second is filing a dispute.
All three credit bureaus allow you to initiate disputes online, but you can also mail in a dispute letter. If you’re mailing a letter, be sure to include the following:
- Your name and address
- The nature of the error you’re disputing
- A copy of your credit report with the disputed information highlighted or circled
- Any supporting documentation you have to show that the item you’re disputing is incorrect
The dispute process for business credit reporting errors is similar, with the key difference being that disputes must be initiated with business credit reporting agencies.
Once you submit a dispute request, the credit reporting agency has 30 days to investigate and verify your claim. It must notify you of the results of their investigation in writing once it’s completed. If it’s determined that an error does exist, the error must be corrected or removed from your credit file.
What to Do If an Error Isn’t Removed
In the event that a credit bureau incorrectly determines the information you’re disputing is valid, there’s one more thing you can try: reaching out to the creditor or vendor that’s reporting the information and dispute it directly.
You’ll need to provide the same background details about the error and what you’re disputing. If the creditor realizes that an error has occurred, they have to update your credit file with accurate information. Taking this extra step could help you get the error corrected or removed, giving your credit score a boost in the process.