Credit Report Items to Watch Out For

Credit reports are critical for obtaining loans, and if your credit report isn't in good shape, you’ll probably have a hard time securing financing. If you need to purchase a new vehicle, buy a home, or start a business, your credit report must show that you’re a responsible borrower. For the most part, these reports are a solid representation of your financial history, but that doesn't mean they're flawless. It’s important to check for inaccuracies and for warning signs that may indicate fraud.

You're entitled to one free credit report per year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. It's a good idea to request and review these each year so you know what's actually being reported.

Spot inaccuracies

For starters, look for inaccuracies. If you find items that simply aren't correct, you can dispute these with credit bureaus by writing a letter or possibly by reaching them on the phone. You'll need to give them proof for this to be successful.

Look for evidence of fraud

When you're checking for inaccuracies, you might come across items that make no sense whatsoever. If this is the case, it might be an indication of identity theft and fraud in which your information has been obtained by criminals who have used your identity to open accounts or borrow money. If you find any evidence of this, you'll obviously need to get in touch with your creditor(s) immediately.

Eliminate outdated late payments

Did you know that while late payments do show up on your credit report, they are only supposed to appear for a period of seven years past that payment? According to Experian, "The seven-year period is based on when the delinquency occurred. Whether the entire account will be deleted is determined by whether you brought the account current after the missed payment. If the account was brought current, the late payments that have reached seven years old will be removed, but the rest of the account history will remain."¹

If you come across outdated late payments on your report, try getting them removed. Even if they're not outdated, you might be able to have them removed with some effort.

According to AAACreditGuide², there are four ways to get late payments removed from your credit report. These include: goodwill adjustment, automatic payments, disputes, and working with a professional credit repair company.

A goodwill adjustment only works if you have been a good customer to your creditor, in which case, you can write a letter asking to have the late payment removed as a gesture of goodwill in light of your otherwise clean track record. They may require you to set up automatic payments to do so, which will help you avoid future late payments.

Ensure that settled debt is reflected

If you have paid off or settled any outstanding debt, make sure that it is reflected in your credit report. There's always the possibility that your settlement was not sent to the reporting bureaus, or if you settled with a debt collector, it's even possible that you were the victim of a scam and are still on the hook for money that you thought had been written off.

Be sure to verify the accuracy of account types

When you're looking for inaccuracies, you shouldn't limit your search to dollar amounts. Pay attention to the actual account types that are listed.

As the National Urban League explains, "This might seem like a minor task; however, different types of credit and loans are calculated differently. For example, a home equity line is a second mortgage and should be reported as such, instead of an installment loan or line of credit."³ Your score might be affected simply because your credit report has an account mislabeled. It never hurts to double-check.

Your credit report is your avenue to various forms of financial assistance, so you must treat it with the importance it requires. Checking up on it on a regular basis could prevent you from having to deal with erroneous reporting in the future when you’re in a rush to make a major purchase.

1. https://www.experian.com/blogs/ask-experian/when-does-7-year-rule-begin-delinquent-accounts/

2. https://aaacreditguide.com/late-payments/

3. http://www.iamempowered.com/article/2015/03/25/check-your-credit-report-these-eight-mistakes

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC