When a simple credit report error could be fraud
By Erica Sandberg
November 18, 2014
I just pulled all of my free credit reports for the first time, and there's a pretty big mistake — a loan that's not mine. I know I have to dispute it, but how will I know it's been corrected? Do I have to pay for my credit reports to see them again (and make sure the mistake has been deleted) since I've already used up my free credit report check for the year? –Sue
You've just illustrated why is so important to check your credit report on a regular basis. Mistakes are not uncommon, and early detection is best. According to a 2013 Federal Trade Commission study that delved into credit report accuracy, one in four people found errors on their consumer credit reports that might affect their credit scores. For one in 20 consumers, errors could get them worse terms for loans.
While the loan you see may be a simple mistake (it's possible the lender sent someone else's information to your report) it could be something worse: evidence of fraud. If so, someone used your identification to borrow the money. They got the cash, but left you with the bill — and the credit damage.
If you believe the account is fraudulent, report the crime to the police, then add a fraud alert to your files. Future lenders will be forced to confirm your true identity before granting new lines of credit and loans. This you can do on the one of the credit bureaus' websites — that company will notify the other two. (Alternately, you can order a security freeze, which prevents lenders from accessing your credit report, and therefore, extending credit. You have to place a security freeze separately with each credit bureau.)
Whether it's fraud or not, you can have this piece of data removed from your reports. As you already know, a dispute is in order. Once you file it with one of the credit reporting agencies (TransUnion, Equifax, or Experian) an investigation into the matter will begin.
Before you deal with an agency, however, help the dispute go smoothly by contacting the financial institution that is reporting the information to your credit files. Here's a guideline:
- Call the lender, and ask to speak with a manager.
- Point out that you never applied for the loan and certainly did not receive the money.
- Ask to have the company stop sending information about the account to your credit file.
- Explain that you will be filing a dispute with the credit reporting agencies, and notifying the Federal Trade Commission (FTC).
- Request they send you confirmation that they agree that the account is not yours.
- Send a letter (certified mail, return receipt requested) summarizing the conversation, copying the credit reporting agencies as well as the FTC.
- Keep copies for your records.
After that, you're ready to dispute the loan with a credit bureau. Make sure you conduct the dispute by mail, not online or over the phone. By disputing with hard letters, you maintain all of your vital consumer rights. Although the agency is required to investigate, it might only do a cursory job. If the creditor claims the loan really is yours, the credit bureau could take the creditor's word for it and not remove the erroneous loan from your file.
At that point, you could take legal action against the credit bureau for not doing its job. But if you disputed the debt via the website or over the phone, you forfeit that opportunity. I'm not implying it will go this far, but it's never a good idea to sign away your rights.
Next, write to one of the credit bureaus (which will contact the other two with the results of the investigation) and summarize the situation in a letter:
- You are disputing X account because it is not yours.
- You want all record of it removed from your report.
- Include any documentation you may have that supports your case (a copy of the letter you sent to the creditor, and if they sent you a letter in return). Also send a copy of the police report, if you filed one.
- Again, send everything certified mail, return receipt requested.
About a month after your dispute, you should receive a letter from the agency with the results of the investigation, plus a free updated version of your credit report if there were any changes.
As for future reports, yes, you can pull them annually at no cost from AnnualCreditReport.com (stagger them throughout the year, one from each credit bureau every four months). However, if you genuinely believe that you are or may be a victim of fraud, you may get your credit reports for free from the agencies themselves.
Got a question for Erica? Send her an email.