Recently, my husband and I refinanced our home. During the process, we were rather surprised to find that, on my credit report, our mortgage loan was duplicated.
That's right: It looked as though we had two mortgages, instead of one. When figuring out our debt-to-income ratio, things could have been ugly, since it the credit report made it look like we were spending close to $3,000 a month in mortgage payments. We might not have qualified for the refinance — let alone got the best mortgage rate offered at the time.
Duplicate accounts have long been a problem on my credit report, as well as my husband's. When we first bought our home, my husband's report showed duplicate student loans accounts, and a duplicate credit card account. Once again, only the loan officer's attention to detail and a note to the underwriting department allowed us to qualify for the best possible mortgage rate.
Could Credit Report Errors Be Costing You?
My husband and I aren't alone with credit reporting errors. About 5% of consumers who check their credit reports have found major errors, according to the Federal Trade Commission. These are major errors that could result in less favorable terms for loans. Other findings from the FTC study include:
- 25% of consumers have errors that might affect their credit scores.
- 10% of consumers who had their reports fixed saw changes to their credit scores.
While it is clear that most consumers aren't going to see negative effects from the information in their credit reports, it's still worth paying attention, since your report could be among those affected.
Indeed, the FTC study found that about 1 in 20 consumers had their scores affected by more than 25 points as a result of the errors in their credit reports. It's rarer to find those who see a change of 100 or more points due to credit reporting errors, but about 1 in 250 consumers are affected.
Fix Errors on Your Credit Report
Checking your credit report for errors is an important part of making sure that your finances are kept in tip-top shape. You should use AnnualCreditReport.com to access your credit report for free. You are entitled — by law — to a free report from each bureau every 12 months. You can also look for other ways to access your credit information to keep on top of the situation.
However, you should check each report annually at minimum in order to correct errors. And, even if you have already checked your free report, you should pay for a non-free version if you are getting ready to use a mortgage to purchase a house. It's important that you fix potentially damaging errors before you apply for credit (unless you want to throw yourself on the mercy of the loan officer and the underwriters).
Once you find mistakes, you can dispute them with the credit reporting agency. If there is a real mistake, the agency has to fix the error. Once the error is corrected, your credit report will reflect better on you. And, if the error was serious enough, it might even mean a higher credit score.